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ISRN Economics
Volume 2013 (2013), Article ID 324127, 4 pages
http://dx.doi.org/10.1155/2013/324127
Research Article

Price Responsiveness in District Heating: Single Houses and Residential Buildings—a Cross-Sectional Analysis

Industrial Management, Kristianstad University, 291 88 Kristianstad, Sweden

Received 10 February 2013; Accepted 13 March 2013

Academic Editors: M. E. Kandil, M. Ransom, R. Wright, and J. Zarnikau

Copyright © 2013 Stefan Hellmer. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

Price responsiveness is argued to be one important factor determining the possibility for a natural monopoly such as a district heating company to exercise its monopoly power. Increased price responsiveness, measured, for example, by the own price elasticity, reduces monopoly power, as consumers increasingly reduce demand as a response to a price increase. However, consumers in single houses having individual metering have presumably higher price responsiveness compared to consumers in residential buildings using collective metering. One major question raised in this paper is thus whether single houses show larger price responsiveness compared to residential buildings. Using cross-sectional data for 187 networks in Sweden for the year 2007 indicates that even if single houses have higher price responsiveness, district heating reveals in general a very inelastic behavior.