An application of Ramsey model in transition economy: a Russian case study

This case study uses the Ramsey model to analyze whether the current electricity prices charged by the natural monopoly Novosibirskenergo in a major industrial region of the Russian Federation are socially optimal. Our estimates of demand elasticities for two major groups of consumers, namely households and industrial users, show that prices are not socially optimal. A decrease in price for industrial users and an increase in price for households would bring the prices closer to socially optimal.