Abstract
The present study offers an argument, through a technical exposition, which suggests that there are cost differences inherent in serving different types of buyers in the electric utilities industry. To this end, we employ a translog joint cost function (for electricity production) with three outputs, which allows for the examination of the cost differences between wholesale and retail trade for vertically integrated, investor-owned companies in the industry. The regression estimates suggest different costs at the means, however the estimated marginal cost curve for wholesale power is not as robust as those for low-voltage and industrial power.
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Berry, D.M., Mixon, F.G. Multiproduct Outputs and Scale Economies in Electric Power Production: Some New Estimates. Review of Industrial Organization 15, 65–76 (1999). https://doi.org/10.1023/A:1007761311872
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DOI: https://doi.org/10.1023/A:1007761311872