Northwestern University
“Smart Rationing: Designing Shortage Mechanisms for Extreme Events”
Time: 12:10pm-1:30pm
Location: 241 Giannini (please bring your own lunch)
Abstract: As shortages of resources like water and electricity due to extreme weather events become more frequent, high prices alone often fail to curb demand, making non-price interventions necessary. We propose a partial rationing policy for residential electricity consumption to limit consumption to avoid traditional rolling blackouts. Using smart meters, we find that consumption limits can provide equivalent savings to large rolling blackouts, even when generous. Additionally, due to selection, partial rationing policies reduce the number of households impacted by a shortage event. We conclude by discussing the welfare consequences of rationing mechanisms and their heterogeneous impacts across households. Full Paper