On the Choice of Optimal Time Periods for a Surplus-Maximizing Utility Subject to Fluctuating Demand

Abstract

The main purpose of this paper is to give a set of necessary conditions for the determination of the optimal switching points between peak and off-peak tariffs. Optimal tariffs are also determined, with some remarks made on the number of different tariff rates and on the best level of capacity to install. The paper concludes with a simple numerical example.