Some Simple Analytics of Peak-Load Pricing
Consider a public utility that offers its service at two different times. We study the effects of a change from uniform pricing throughout the day to peak-load pricing. We show that for a utility constrained to operate with a fixed rate of return on capital, the introduction of peak-load pricing can plausibly reduce the price of the service it both in peak and off-peak times. We also find that peak-load pricing can lead to either greater or smaller capacity than uniform pricing. We find a simple criterion for determining whether a particular individual gains or loses from peak-load pricing.
Ted Bergstrom and Jeffrey K. Mackie-Mason. "Some Simple Analytics of Peak-Load Pricing" Rand Journal of Economics 22.2 (1991): 241-249.