Abstract: This paper constructs an input-output model with price heterogeneity, and proves that the model has non negative solution. Then the model is used to analyze the effects of marketization of electricity price on the production cost of various industries and the living cost of households at different levels of income. Based on the data of 2012 Chinese input-output table, the cost effects of coal price increase, considering the scenarios of coal-electricity price linkage and electricity price marketization, are simulated. According to the rules of the electricity price marketization policy in China, the cost effects of 10% increase and 15% decrease of electricity price are analyzed. The result shows electricity price marketization would increase the industrial production cost and living cost of households more significantly than the policy of coal-electricity price linkage when the coal price goes up. However, the policy of electricity price marketization could resolve the structural contradictions of coal and electricity prices. The fluctuations of electricity price would significantly affect the costs of energy-intensive industries, and the decrease of electricity price could lower the costs of industries effectively. Yet for the production of electricity, the decrease of cost originating from electricity price cutting could not cover the decrease of electricity price, which means that the electricity firms would make smaller profits or suffer larger loss. For urban households at various levels of income, the effects of increase of coal price on their living costs are regressive, and for the rural households at various levels of income, the effects are almost the same; the effects of electricity price fluctuation on urban households are greater than those on rural households, and for both kinds of households, the effects are progressive. When electricity price decreases, the households with higher income would benefit more than the households with lower income.

Key words: input-output model, price heterogeneity, electricity price marketization