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Abstract

The electric power shortages in China the period from 2002 to 2007 had pervasive effects. How to measure the economic costs of power shortages becomes one of the central questions of interest to regulators, industrial users, and investors. The current study estimates the objective outage costs to industrial users using an adjusted Tobit model and survey data on 812 firms in six provinces in China during 2002–5. Empirical results show that objective outage costs are higher than the willingness to pay to avoid outages, but are lower than the willingness to accept to accept outages, implying that firms are loss averse.