Consumer switching behavior and bundling: an empirical study of Japan’s retail energy markets

Abstract

After the full liberalization of Japan's retail electricity and city gas markets, marketing strategies such as the bundling of electricity, gas or other services have become very popular. According to the previous theoretical literature, bundling strategies can increase the switching costs incurred by consumers and reduce the probability of consumers switching retail suppliers. This study empirically examines whether retail suppliers' bundling strategies affect consumers' switching behavior in Japan's retail energy markets. Implementing a discrete choice model using micro-data on households in the Kansai region of Japan, this study obtains results, showing that when consumers subscribe for electricity bundled with gas or other services, they are significantly less likely to switch their electricity suppliers. This paper provides policy implications for reviewing market competition and consumer welfare after the full liberalization of Japan's retail energy markets.

Switching Behavior in the Polish Energy Market—The Importance of Resistance to Change

“…Some interesting conclusions were presented by Giulietti, Waddams, and Waterson [17], who pointed out that incumbent energy suppliers retained considerable market power despite the process of liberalization in the energy market. However, consumers' switching decisions demand time and patience-according to researchers, the accumulation of switching experiences can reduce transaction costs for consumers and promote consumer switching [18]. The final decision on switching to another supplier is a two-step decision: first, a consumer needs to take the step of considering switching (analyzing the market alternatives), and next, a consumer decides whether to switch from the current supplier or not [18].…”

“…However, consumers' switching decisions demand time and patience-according to researchers, the accumulation of switching experiences can reduce transaction costs for consumers and promote consumer switching [18]. The final decision on switching to another supplier is a two-step decision: first, a consumer needs to take the step of considering switching (analyzing the market alternatives), and next, a consumer decides whether to switch from the current supplier or not [18]. Since retail energy markets have opened, regulators and competition authorities have placed increasing emphasis on the importance of active consumers who check and shop around for better deals to ensure a well-functioning market.…”