TITLE:
Analyzing Small Industrial and Commercial User Demand for Electricity
AUTHORS:
Keighton R. Allen, Thomas M. Fullerton, Jr.
KEYWORDS:
Duality Theory, Derived Demand, Electricity, Small Industrial and Commercial
JOURNAL NAME:
Theoretical Economics Letters,
Vol.8 No.14,
October
25,
2018
ABSTRACT: This study employs duality theory to develop a
theoretical model for small commercial and industrial (CIS) electricity usage.
The CIS production function is posited such that output is a function of three
variable inputs (electricity, natural gas, and labor) and one fixed input
(capital). A profit function dual to this production function is specified
using a normalized quadratic functional form. CIS profits are functionally
dependent upon output price, an electricity input price, and natural gas and
labor input prices for a fixed quantity of capital. The derived input-demand
equation results from differentiating the profit function with respect to the
price of electricity. The input-demand equation for electricity is dependent
upon the own-price of electricity, the CIS output price, and input
cross-prices. The model may be of use to utilities and regulators for the
analysis of CIS electricity usage.