Alert the Inert? Switching Costs and Limited Awareness in Retail Electricity Markets

Dressler, Luisa; Weiergraeber, Stefan

doi:10.1257/mic.20190163

Cited by 6 publications

(3 citation statements)

References 46 publications

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“…In this context, automation technology and, more generally, information provision can effectively help eliminate this bias from demand response. Similar findings have been supported by Ito et al (2017) and Dressler and Weiergraeber (2023).…”

Section: Literaturesupporting

confidence: 88%

Impact of monetary incentives on the adoption of direct load control electricity tariffs by residential consumers

Cerruti¹,

Filippini²,

Savelsberg³

et al. 2023

AEA Randomized Controlled Trials

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To overcome the inherent clash between the ever-increasing push for electrification in the transportation and heating sectors, and the intermittent nature of renewable energy sources, demand response solutions such as direct load control (DLC) tariffs are receiving growing attention from researchers and policymakers. The present study aims to investigate the impact of two measures (i.e. a video intervention and an upfront subsidy) in increasing the acceptance rates of an existing DLC tariff targeted at electric vehicle charging stations and heat pumps in Switzerland. To achieve this, we combine two randomized-controlled trials:(1) a stated-choice contingent valuation on electric vehicle owners to confirm the validity of the upfront susbidy, and (2) a revealed-preference field experiment on an existing DLC tariff proposed to the clients of a local distribution system operator. Results suggest that both measures of video and monetary intervention increase contact and subscription rates to the proposed DLC tariff, although the monetary intervention appears to be more convincing to consumers. Further, we use these results in combination with a bottom-up electricity market model to simulate the consequences on the level of system cost of a large-scale implementation of a DLC tariff.

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Section: Literaturesupporting

confidence: 88%

Impact of monetary incentives on the adoption of direct load control electricity tariffs by residential consumers

Cerruti¹,

Filippini²,

Savelsberg³

et al. 2023

AEA Randomized Controlled Trials

View full text Add to dashboard Cite

show abstract

“…This way, the firm can price discriminate and cover consumers with different search costs. Using data on Belgian consumers, Dressler and Weiergraber (2022) demonstrate that even a perfectly informed consumer—i.e., a consumer who is aware of market offers—sustains sizable switching costs when making a choice in terms of electricity providers, up to 80% of the monthly energy bill. This is in line with Gugler et al (2018), where the incumbent is able to retain consumers even if its offer is more expensive with respect to the competitors’ offers, signalling the presence of status quo bias.…”

Section: Literature Reviewmentioning

confidence: 99%

Measuring Switching Costs in the Italian Residential Electricity Market

Magnani¹,

Manenti²,

Valbonesi³

2024

The Energy Journal

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Residential electricity markets in European countries are still characterized by low consumer engagement, especially where regulated and liberalized markets coexist. Using an original dataset on 2015-2018 prices for the Italian electricity market, augmented with the number of residential consumers, we study the presence and magnitude of switching costs-i.e., time-based and cognitive-based costs on consumers changing providers-in the liberalized market. We find that switching from the incumbent involves high costs-almost as high as the yearly energy expenditure-while switching from competitors is less expensive. We also carry out two counterfactual analyses. In the first, we show that consumers would have incurred lower average switching costs over the years had the market been less concentrated. In the second, we simulate how switching costs could evolve once regulated prices are phased out, and the market is fully liberalized.

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“…Let us limit ourselves here to selected items from 2023 only. Dressler and Weiergraeber [42] deal with the inertia of electricity consumers and their low understanding of the rules of the market, which discourages them from changing suppliers, even when it may improve their welfare. Gelman et al [43] constructed a model with which they studied reactions of American consumers' spending to changes in gasoline prices.…”

Section: Review Of Literature and Context Analysismentioning

confidence: 99%

Cost of Energy Consumption and Return of Excise Tax on Motor Fuels vs. the Durability of Operations and Financial Sustainability in Polish Agriculture

Kulawik,

Soliwoda,

Kurdyś-Kujawska

et al. 2023

Energies

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For the European Union, the course of the Community’s energy and climate policy as well as changes in the objectives and priorities of the Common Agricultural Policy, as reflected, among others, in rural development programs subject to ex ante, environmental and ex post evaluation, should be considered. Individual EU countries are still implementing their own programs focused on improving energy efficiency, energy modernisation and supporting renewable energy, and they also intervene in the energy market on an ad hoc basis, as was the case after the outbreak of the war in Ukraine. This article fits into such a broadly understood research perspective, and its primary goal is to identify the impact of the costs of energy consumption and the reimbursement of excise tax on motor fuels on the operational durability and financial sustainability of 103 farms belonging to the Polish FADN network, which in 2017–2021 implemented modernisation projects under the rural development program. Logistic and linear multivariate regression were used to estimate the strength, direction and significance of correlation relationships. It was found that relative energy costs were significantly negatively correlated with financial sustainability only in the linear model, while the impact of excise tax return was positive but not significant. Thus, an empirical proof of the advisability of a possible public intervention aimed at making farmers’ access to energy cheaper was obtained. All public interventions in agricultural energy use should be subject to careful and systematic ex ante, mid-term and ex post assessments based on sound program theory. It is necessary to identify the cause-and-effect chains, in which the regression proposed in the article may be helpful.

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Alert the Inert? Switching Costs and Limited Awareness in Retail Electricity Markets

Cited by 6 publications

References 46 publications

Impact of monetary incentives on the adoption of direct load control electricity tariffs by residential consumers

Impact of monetary incentives on the adoption of direct load control electricity tariffs by residential consumers

Measuring Switching Costs in the Italian Residential Electricity Market

Cost of Energy Consumption and Return of Excise Tax on Motor Fuels vs. the Durability of Operations and Financial Sustainability in Polish Agriculture

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