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Faculty & Research

Electricity Pricing with Limited Consumer Response

10 Oct
2019
11:00 am
Paris
English

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2019-10-10T11:00:00 2019-10-10T12:30:00 Electricity Pricing with Limited Consumer Response Information Systems and Operations Management Speaker : Saed Alizamir Associate Professor of Operations School of Management, Yale University HEC Campus - Jouy-En-Josas - Buil. V - Room Bernard Ramanantsoa Paris

Information Systems and Operations Management

Speaker : Saed Alizamir Associate Professor of Operations School of Management, Yale University

HEC Campus - Jouy-En-Josas - Buil. V - Room Bernard Ramanantsoa

Abstract:

 

Matching demand with supply has been a long-standing challenge in operating residential electricity markets. The utility firms often face stochastic demand functions that are affected by the unpredictable exogenous random shocks (e.g., outdoor weather condition). Although various Demand Response programs are in place to regulate electricity consumption, the effectiveness of these programs has been undermined, largely because the consumers have demonstrated limited capability in adjusting their household appliances' settings. In this paper, we construct a demand model to describe how consumers make consumption decisions in response to random external factors representing their ambient environment at a given price. To that end, we adopt the notion of "rational inattention" to capture the consumers' inertia in readjusting their decisions over time. Subsequently, we investigate an electricity firm’s pricing decision as well as its impact on social welfare and system reliability. Our findings highlight the nuanced implications of rationally inattentive consumers and lead to guidelines for better regulating retail electricity markets.

 

 

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2019-10-10T11:00:00 2019-10-10T12:30:00 Electricity Pricing with Limited Consumer Response Information Systems and Operations Management Speaker : Saed Alizamir Associate Professor of Operations School of Management, Yale University HEC Campus - Jouy-En-Josas - Buil. V - Room Bernard Ramanantsoa Paris