As is often pointed out, this average pricing does not incentivize retailers to increase retail service efforts, because any cost reduction arising from their service effort is reflected in the average price, and profit remains unchanged.
Because retailer profit is fixed under the default system, the retailer has little interest in retail service effort.
We assume this retail cost increases with the total amount of traded electricity Q and that retailers can decrease this cost through retail service efforts e, that is, (C_{Q}>0) and (C_{e}<0).
In contrast to the default system, the retail electricity price is determined by the marginal cost pricing and a retailer has an appropriate incentive to increase retail service efforts, thus maximizing social welfare.
In 2008, Procter & Gamble, Unilever's great rival, bought a stake in online retailer Ocado, yet it has still to launch a meaningful retail service.
"For small communities you have 20 to 30 retail service providers.
The city's economy is now dominated by the retail, service, and financial sectors, and it has a small manufacturing component.
Retail service occupations like sales clerks and cashiers, already among the largest job categories, will also grow strongly.
— Brian X . Chen SolarCity Scores FirstUtility Deal Gigaom.com | A company that began as an electric retail service provider competing with utilities is now working for one.
