Using a Choice Experiment Survey to Estimate Iranian Households' Willingness to Pay to Avoid Power Outages

Abbaszadeh, Nosratollah; Ahmadian, Majid; Rahbar, Farhad; Abrishami, Hamid

doi:10.22059/jte.2013.50577

Using a Choice Experiment Survey to Estimate Iranian Households' Willingness to Pay to Avoid Power Outages

Document Type : Research Paper

Authors

Nosratollah Abbaszadeh ¹

Majid Ahmadian ²

Farhad Rahbar ³

Hamid Abrishami ⁴

¹ Ph.D of Economics, University of Tehran, Tehran, Iran

² Professor, Faculty of Economic,s University of Tehran, Tehran, Iran

³ Professor, Faculty of Economics, University of Tehran, Tehran, Iran

⁴ Professor, Faculty of Economics University of Tehran, Tehran, Iran

10.22059/jte.2013.50577

Abstract

Using a choice experiment survey, the marginal willingness to pay (WTP) among Iranian households to avoid power outages is estimated. The results indicate that households prefer lower price of alternatives and the low duration and frequency of outages, and the factors of outage day, outage time and warning in advance of outage are important to households' preferences. Moreover, the conditional logit model with interaction effects of SED variables allows us to explain the unobserved heterogeneity of preferences. The results of this model show that the marginal WTP increases with increasing of household’s expenditure, age of respondent and electricity consumption in the last period. Given that households have negative welfare effects from outages, it is important that policy makers consider these negative impacts on household utility when deciding about reliability of electricity network.

Keywords

choice experiment method

Conditional Logit

power outages

Willingness to Pay