An Estimation of Natural Gas Domestic Demand Function by Using Kalman Filter Method (A Case Study of Residential Gas Demand Function in Tehran)

It is essential to study the demands for this energy carrier in different and separate sectors, by considering the effective factors in each sector. Meanwhile residential sector has the greatest consumption rate with near 25% in recent years. Effective factors of demand in this sector divide into observable factors, like carrier price, consumer income, and temperature on the one hand and unobservable factors like consumer's habits and taste, gas burners technology on the other hand. Regarding the impact of temperature on the consumption of residential sector, estimation of the multipliers in a specific region (like Tehran) will help the explanation of this variable to improve. Furthermore, in this study, Kalman filter technique is used to prevent the bias estimation of multipliers while considering the impact of unobservable factors and other variables. Finally we came to the conclusion that price and income elasticity of demands are -0.098 and 0.114 respectively.