Consumer Preferences and Switching Behavior: An Experimental Testing of Status Quo Effects in the Electricity Market

Abstract

For a long time, consumer research has been investigated the causes of the switching behaviour of consumers in the liberalized electricity market. More recent research in decision theory suggests that consumers non-switching is based on the so-called status quo bias. The status quo bias reflects the tendency to over-proportionally stick to the current state. In an economic decision experiment, the influence of the status quo bias is empirically tested. Using a choice-based conjoint analysis, consumers are offered different variations of electricity contracts. The experimental investigation was conducted in August 2016 in the US state of California. 584 participants in total were assigned randomly in a control and an experimental group to a modified choice-based conjoint analysis. In each of the 15 conducted choice tasks, the participants had to choose an electricity contract. The difference between the control and the experimental group was only that one of the five electricity contracts in each choice task was preselected as a status quo option. The results show significant differences between the control and the experimental group in terms of part-worth utilities for attribute levels and relative importance of attributes. Contrary to the expectations of the rational choice model, the framing of the choice task with and without the preselection of a status quo option significantly influences the decision behaviour of the participants. These results raise doubts as to whether competitive markets driven by individual preferences are a good tool to reward long-term infrastructure and climate policy in the electricity market instead of political measures driven by collective choice. It seems that consumer preferences for preventing climate change are susceptible to framing effects.