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Study on the Social Welfare Function and Its Application for Electric Power Universal Service Based on Prospect Theory

Author(s): Chun-Jie Li*, Yan-Cong Cheng, Hui-Ru Zhao
School of Economics and Management, North China Electric Power University, Beijing, 102206, China
International Journal of Smart Grid and Clean Energy, vol. 1, no. 1, September 2012: pp. 29–32
ISSN: 2315-4462
Digital Object Identifier: 10.12720/sgce.1.1.29-32 

Abstract: Electric power universal service is a procedure of government public policies. Due to the different subjective induction for individuals, the social welfare of electric power universal service doesn't meet the axiom of individuals' utility sum, which is a principle of traditional utility theory. Influencing factors of individuals' welfare effectiveness are analyzed in this paper. According to income levels and electricity consumption of residents, as well as real-life improvement and wellbeing for future, prospect theory is applied to study residents' welfare induction of the service. Taking for example by Atkinson's welfare function and Bernoulli-Nash' welfare function, welfare function of electric power universal service is constructed.  The case study shows that residents' welfare induction of the service more depends on relative changes of influencing factors, especially in remote areas.
Keywords: Electric power universal service; prospect theory; welfare function

Full Paper.pdf

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