peak-load pricing

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A price structure in which more is charged for units supplied at peak-load periods than for units supplied at other times. The argument for peak-load pricing is that the total capacity needed for a power, transport, or telephone system is determined by the maximum output it has to provide. If demand fluctuates daily or seasonally, charging higher prices at times of peak-loading makes prices reflect the extra capacity costs imposed by peak-period users. It also gives an incentive for customers who can avoid the peak period at low cost to themselves to do so.

Subjects: Economics.

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