Scandinavian Working Papers in Economics
Working Papers in Economics,
University of Gothenburg, Department of Economics
No 154: Willingness to Pay among Swedish Households to Avoid Power Outages - A Random Parameter Tobit Model Approach
Fredrik Carlsson () and Peter Martinsson ()
Additional contact information
Fredrik Carlsson: Department of Economics, School of Economics and Commercial Law, Göteborg University, Postal: Box 640, SE 405 30 GÖTEBORG
Peter Martinsson: Department of Economics, School of Economics and Commercial Law, Göteborg University, Postal: Box 640, SE 405 30 GÖTEBORG
Abstract: Using a contingent valuation survey, we elicit Swedish households’ willingness to pay (WTP) to avoid power outages. In the study respondents are asked to state their WTP for avoiding nine different types of outages. We therefore apply a random parameter Tobit model since there is cross-sectional heterogeneity and a proportion of zero responses. Based on the estimations, we find that the WTP depends positively on the duration of the outages, and that WTP is significantly higher for unplanned outages. The overall variation in the WTP due to observed heterogeneity in housing and socio-economic variables is small compared to the pure effects of power outages. Policy implications of those findings are discussed.
Keywords: Power outages; Contingent Valuation; Random parameters; Tobit model
20 pages, December 20, 2004
Note: Published in Energy Journal, 2007, Vol 28, pp. 75-89.
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