Roland Andersson

Short- and long-run marginal cost pricing: On their alleged equivalence

Abstract The equivalence between short-run marginal cost (SRMC) and long-run marginal cost (LRMC) in a fully adjusted equilibrium has been proved over and over again. In the literature dealing with public utility pricing, this basic result has been taken to imply that it is optimal to set prices at LRMC. Important contributions to this literature are reviewed in this paper. The equivalence, however, is valid only under the very restrictive assumption that the capacity can be varied continuously. This means that indivisibilities, irreversibilities and durability of investments are ignored. Where such phenomena exist, as in electricity production and distribution, pricing according to LRMC is neither theoretically valid nor applicable. It is not surprising that it has been difficult for public utilities to define the LRMC concept operationally; average cost concepts are used as ‘approximations’. Under these circumstances we find it advisable to dispense with the LRMC concept altogether and rely on pricing based on SRMC.

Pricing cogenerated electricity and heat in local communities

Abstract This paper considers optimal pricing of cogenerated electricity and heat used for district heating in local communities. The analysis shows that the price structure given on the national market for high-voltage power will in most cases be reflected in the optimal price structure on the local market for electricity, i.e. one price in peak periods and lower prices in off-peak periods. Another result of great practical interest is that in some cases the optimal price structure on the district- heating market will be the reverse. The existing price structures do not conform to these findings. The short-run welfare gains of switching to optimal prices in a stylized local community are measured and found to be substantial.

Evaluation of school closings: A case study from Vasteras, Sweden

Abstract The main objective of this paper is to present an evaluation technique that admits comprehensive treatment of the problems of school closings. This evaluation technique was applied to a real case: which one of two high schools in the city of Vasteras, Sweden should be closed down. The result of this evaluation is presented.

Appraisal of energy R&D projects from the Swedish government's perspective

The focus of this paper is on criteria for appraisal of energy R&D projects from the Swedish governments perspective. The welfare-maximizing criterion of society is contrasted with the criterion of a profit maximization firm. In particular, the criterion for appraisal of R&D projects considering markets abroad is described.

An extension of Mohring’s model for land rent distribution

Abstract In an early paper Herbert Mohring ( J. Pol. Econ. , 49 (1961)) presented a model for land rent distribution yielding the well-known result that the price of land must fall with the distance from the city center to offset transportation costs. Our paper is an extension of Mohrings model in which we relax some of his drastic simplifying assumptions. This extended model has been incorporated in a method for economic evaluation of city master plans which has been applied to a Swedish city. In this method the interdependence among housing, heating, and transportation, the durability of urban structures, and the uncertainty of future demand are explicitly considered within a cost-benefit approach. Some empirical results from this pilot study concerning land rent distributions are also presented here.

Evaluation of school plans

A model is presented for simulation and economic evaluation of school plans within the framework of city master planning. The model has been applied to plans for a Swedish city, Vasterȧs, and some illustrative results are reported.

A model for the economic evaluation of master city plans: a pilot study of Västerås, Sweden

The paper introduces the framework, problems addressed, objective function, types of variables and so on for a model designed to facilitate the economic evaluation of master city plans. The model presented here has been used in a pilot study of the city of Vasteras, Sweden. It consists of three main parts, data, results and method. Some conclusions are drawn.

A dynamic, probabilistic model for city building

The problem of interdependence between housing and commuting in a city has been analysed within the framework of welfare economics. Uncertain changes overtime in the working population has been considered by means of a dynamic, probabilistic model. The characteristics of irreversibility and durability in city building have been explicitly dealt with. The ultimate objective is that the model after further development will be an auxiliary tool in city planning.

On the lakefront? a cost-benefit analysis of alternative location of housing in Västerås, Sweden

Residential construction at attractive sites commands high market values regardless of whether such values accrue to first buyers or some other owners. If differences in expected market values of sites are not taken into consideration when Swedish local councils choose a city plan, there is a strong risk that they will choose the wrong plan. This requires comprehensive cost-benefit analyses of different alternatives. Such a cost-benefit analysis of two alternative housing locations based on an authentic case, one with and one without a lake view is presented.

The investment criteria of the Swedish electricity industry

Abstract This article examines the investment criteria used by the Swedish power industry. The so-called combined criterion has several practical advantages. One is that it facilitates consideration of the value of an increase in the reliability of the electric power system with respect to energy and to capacity simultaneously. Another is that it can be used to evaluate expansion and replacement investments as well as investments in pure reserves. The dimensioning of energy reserves is also discussed. The Swedish power industry use an evaluation of the costs of an energy shortage that is the same regardless of the size of the shortage. The effects of assuming that the costs of a shortage increase with the size of the shortage are studied and estimates of the optimal size of the energy reserve have benn made under alternative assumptions. These estimates indicate that the Swedish energy reserve may be excessive at present.