Current Pricing Schemes Research Articles

Optimization of On-Street Parking Charges Based on Price Elasticity of the Expected Perceived Parking Cost

Price discrimination is widely employed to regulate on-street parking behaviors to provide better service to users, and the prices are usually set according to the occupancy of parking spaces without direct consideration of user perception. A binary logit-style choice model is built to describe the parking choice between on-street parking and off-street parking. A new index, named the price elasticity of expected perceived parking cost, is proposed to evaluate users’ response to parking charge. Based on the theory of second-degree price discrimination, three user types are defined according to the parking duration, namely, the preferred users, the neutral users, and the non-preferred users. The optimized parking prices are calculated by the proposed index. A case study of Guangzhou’s on-street parking is presented. It is found that the current pricing scheme for Type-I Zones (High Demand Zones) is reasonable, while the pricing scheme for the Type-II Zones (Low Demand Zones) does not achieve the objectives of usage optimization of on-street parking spaces. An optimized price scheme for the Type-II Zones is proposed to achieve the usage optimization of on-street parking spaces for short-term parking.

Leveraging Slack Capacity in IaaS Contract Cloud Services

We study capacity planning in the context of Infrastructure as a Service (IaaS) cloud services. Concretely, we propose models for optimal pricing and virtual machine allocation to maximize revenue while maintaining service reliability. Our models are based on current pricing schemes used by predominant cloud services providers in the market. These providers frequently face slack capacity and low utilization in resources, so that they require better planning in the allocation of non‐revenue‐earning resources that could significantly affect profitability. In particular, we propose two novel hybrid service models, each combining two basic types of cloud services: reserved‐instance (contract) and on‐demand, and provide conditions under which they become dominant. We compare analytical properties of different service models, derive closed‐form solutions and structural results to assess the strategic impact of the different models, and conduct numerical analysis to test how optimal solutions change with respect to critical system parameters such as service rate, market size, and service reliability.

Specificity of Price Setting in Power Producing Idustry (The Case of Kaliningrad Region)

Regional pricing processes for strategic consumer products (such as products of power producing industry) in local markets are a mobile system of interdependent factors of the external regional space and the inner socio-economic environment. In the context of the existence of the need to provide a set of strategically important products for the regions power sector due to political issues, exclave specificity and sanctions agenda of Kaliningrad Region, the regulation of the pricing process for product of power generating industry is crucial. According to the opinion of the authors of the article, the current situation in the intra-regional market of the power producing industry is developing more dynamically than the regional authorities succeed to react, what is reflected in the new factors identified by the authors of the article. Among these factors the growth rate of prices for products of the energy generating industry over the past 5 years can be mentioned, despite the active development of Kaliningrad regions program for the achievement of complete self-sufficiency of basic goods in the power producing industry (electricity). In order to identify the main trends in the field of price setting in this industry, the authors analyze the data on price dynamics and the volumes of consumption of products of regions energy generating sector, taking into account the development of power generation programs of Kaliningrad region. The analysis made by the authors allows identifying the main problematic aspects of price setting taking into account regional specifics and on their basis to suggest a current pricing scheme in the power producing industry as an applied tool for the regulation and management of demand and provision of products that are strategic for the energy generating industry of the exclave region. Besides, the authors identify the regional specificity of price setting in the energy generating industry, and determine the promising dynamics of the movement of these processes in their problematic and systematic characteristics.

Comparative Scorecard Assessment of Urban Water Pricing Policies—The Case of Jordan and Iran

Urban water pricing is becoming increasingly important due to the rapid rate of urbanization and the expansion of water reclamation and reuse. The mounting evidence of failures of current pricing schemes makes analyzing their performance essential for understanding the adequacy of economic and sustainability policies in water management. However, urban water pricing policies are complex, serve multiple objectives, and vary widely across regions and countries. This paper presents an assessment framework for urban water pricing policies based on common conditions advocated for well-functioning pricing policies. Using a simplified scorecard, it compares the performance of urban water pricing policies in Jordan and Iran, two countries under growing scarcity pressure. Both countries show serious deficiencies with regard to the economic valuation of water services and the cost recovery of utilities. Public policies are rather oriented towards access and affordability, with Jordan showing a higher level of transparency and competition in tariff-setting. The assessment tool indicates a high potential for experience-sharing in future reforms, which should promote water as a scarce good. Such reforms need to prioritize full cost valuation, participation, and scientifically based designs of local and regional water tariffs.

Network pricing for customer-operated energy storage in distribution networks

Network pricing is essential for electricity system operators to recover investment and operation costs from network users. Current pricing schemes are only for generation and demand that purely withdraws or injects power from/into the system. However, they cannot properly price energy storage (ES), which has the dual characteristics of injecting and withdrawing power. This paper develops a novel pricing scheme for ESs in distribution systems operated by customers to reflect their impact on network planning and operation. A novel charging and discharging methodology is designed for ESs to respond to time of use tariffs for maximising electricity cost savings. The long-term incremental cost for ES is designed based on future reinforcement horizon and short-term operation cost is quantified by system congestion. Then, a novel pricing scheme for ES is designed by integrating the two costs. The pricing signals can guide ES operation to benefit both distribution network operators and ES owners. The new methodology is demonstrated on a small system with an ES of different features and then on a practical Grid Supply Point (GSP) area.

One Size May Not Fit All: Welfare Benefits and Cost Reductions with Differentiated Household Electricity Rates in a General Equilibrium Model

We consider optional TOU (time-of-use) pricing for residential consumers as an alternative to a single TOU or flat rate structure offered by a publicly regulated electricity supplier. A general equilibrium model is developed and used to explore and quantify the effects of optional pricing on welfare, consumption, and production costs. The model assumes that households can be classified into internally homogeneous groups with differing utility functions, incomes, demand elasticities, and committed consumption requirements. Substitution for electricity among TOU periods and between electricity and other goods is allowed for in the model on the demand side, and differing TOU-specific marginal costs on the supply side. The supplier in the model offers to each household a menu of possible rate sets obtained by maximizing a collective welfare function subject to three types of restriction: Pareto efficiency (no household is worse off under the proposed pricing scheme than under the current pricing scheme); incentive compatibility (every household weakly prefers its set of rates to the sets chosen by other households); breakeven supplier revenue (aggregate revenue must equal aggregate cost). The model is calibrated realistically with three household groups and three distinct TOU costing periods, and used in a series of simulation experiments, including experiments with alternative demand elasticities and marginal cost parameters. The use of optional pricing is shown to increase overall consumer welfare and reduce average production cost. However, the distribution of welfare effects can be uneven, with the highest income group dominating the market to the relative disadvantage of the lowest group. To deal with that situation an alternative strategy with a targeted rate structure for the lowest income group is proposed, corresponding to a modified version of the model specified in which some incentive compatibility restrictions are relaxed. Simulations show that the strategy can be effective in bringing about a more equitable distribution of welfare gains while still maintaining optional TOU pricing.

Operational planning for multi-building portfolio in an uncertain energy market

In this study, we propose an optimization framework for day-ahead operational planning of a multi-building portfolio under market uncertainty. The portfolio of interest consists of two groups of buildings: controllable and uncontrollable. In the proposed framework, first, physics-based and statistical models are developed for estimation and prediction of end-use consumptions including Heating, Ventilation Air Conditioning (HVAC), lighting, and equipment in controllable buildings. In addition, calculation of hourly load distributions in uncontrollable buildings is developed using a non-parametric bootstrapping method. Then a multi-objective mathematical programming is formulated to minimize the energy expenditure given utility price signals while satisfying the occupants’ comfort. The proposed pricing scheme considers the differences between the day-ahead and real-time prices to reflect the trend of energy market uncertainty. It is demonstrated that this pricing scheme results in better performance, in terms of achieving to demand management goals, than the current scheme. Current pricing scheme is solely based upon the day-ahead forecasted price. The performance of the proposed framework is explored using real energy market data.

Pricing of Differentiated Services: Apparent Loss and Welfare

The results in this paper address the question of how to evaluate and implement optimal price-lead time menus for congested service providers when market knowledge is limited. We formulate the economic assignment problem for the allocation of lead-times to customers with two-dimensional types, heterogeneous in both value for service and sensitivity to delay, as a deterministic optimization. We identify a novel measure, apparent loss, which is the difference between current revenue and the maximum feasible revenue under the current pricing scheme. For systems where total delay is a convex function of customer arrival rate, the apparent loss is shown to have the following characteristics: it is an upper bound on the difference between current and maximum welfare, minimizing apparent loss also minimizes welfare, and it can be calculated from operational information. We argue that the apparent loss is a useful heuristic for evaluating the quality of a particular pricing scheme when market information is costly or not available. We also demonstrate how apparent loss may be used as a measure to guide an adaptive pricing algorithm. The adaptive pricing algorithm is initialized with a known set of feasible prices and shown through computational experiments to find pricing schemes which deliver near optimal welfare.

Fuel ethanol from cane molasses in Thailand: Environmental and cost performance

In the context of the world's energy crisis and environmental concerns, crop-based ethanol has emerged as an energy alternative, the use of which can help reduce oil imports as well as emissions of CO 2 and other air pollutants. However, a clear disadvantage of ethanol is its high cost over gasoline under the current pricing scheme that does not include externalities. The intent of this study is to perform a life cycle analysis comparing environmental and cost performance of molasses-based E10 with those of CG. The results show that although E10 provides reduction in fossil energy use, petroleum use, CO 2 and NO x emissions, its total social costs are higher than those of gasoline due to higher direct production costs and external costs for other air emissions, e.g. CH 4, N 2O, CO, SO 2, VOC and PM 10. An analysis of projection scenarios shows that technological innovations towards cleaner production help maximize ethanol's benefits whilst minimizing its limitations.

Airport marginal cost pricing: discussion and an application to Swedish airport

In this paper, an optimal airport-pricing model is derived, both with and without a constraint on the revenues, that includes all relevant external marginal costs. Given the results of the model, the implications on the profit of airports are discussed. It was found that, given that proceeds of the environmental charges are seen as revenue for the airport, it is not obvious that a marginal cost-pricing scheme would result in financial deficits for the airports, despite the reasonable assumption of increasing returns to scale in airport capacity. Using relatively crude estimates of the marginal costs, the current pricing scheme is compared with a marginal cost pricing scheme. Findings show that the effect on revenues of moving towards a marginal cost pricing scheme may not be so dramatic; especially not if the marginal external costs include estimated marginal costs of carbon dioxide emissions.

Pricing research and development services in the USSR

Most Soviet applied research and development (R&D) is performed by organizations of industrial branch ministries. Pricing of applied R&D begins with calculations of costs. which are often inflated. Soviet specialists disagree on whether R&D prices should include a profit above cost, and, if so, how the profit should be determined. Current pricing schemes for applied R&D include profits based on planned wage cost, on planned total cost, or on the economic effect of the R&D. The use of the last pricing method is analyzed and evaluated in detail. In principle this method creates incentives for timely delivery of high quality R&D results suitable for assimilation into production. However, in practice the strength of these incentives is considerably weakened by a number of factors.