Market Liberalization: Price Dispersion, Price Discrimination and Consumer Search in the German Electricity Markets

Abstract

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. AbstractWe study how consumer search affects pricing in markets with incumbents and entrants using panel data on German electricity retail markets. Consumers observe the baseline price of the incumbent and decide whether or not to search. Incumbent providers can price discriminate between searching and loyal consumers. Empirically we show that local incumbents increase their baseline rate while entrants decrease their tariffs if consumer search increases. Moreover, the incumbent price discriminates more strongly in markets with more consumer search. Using a theoretical model, we show that these pricing patterns are consistent with the strategic interaction of profit-maximizing firms.

Measuring Switching Costs in the Italian Residential Electricity Market

“…On the other hand, switching by consumers already in the liberalized market is positively affected by firm incumbency. Gugler et al (2018) also explored the role of incumbency considering the German electricity market. They found that the incumbent has an incentive to increase the price of its baseline offer when consumers search more while decreasing the price of its market offer.…”

Consumer Information and Price Transmission: Empirical Evidence*

“…A vivid example is that with the growth of the Internet, we suddenly have markets with essentially no search costs' (p. 140). The impact of online search and Internet purchases on prices has been investigated for many dierent markets, including automobiles (Morton, Zettelmeyer, and Silva-Risso, 2001), life insurances (Brown and Goolsbee, 2002), books (Tang, Smith, and Montgomery, 2010), consumer electronics products (Baye, Morgan, and Scholten, 2004), airline tickets (Orlov, 2011;Sengupta and Wiggins, 2014), electricity (Gugler et al, 2018) and retail gasoline (Luco, 2019) .…”

“…[2004]), airline tickets (Orlov [2011]; Sengupta and Wiggins [2014]), electricity (Gugler et al . [2018]) and retail gasoline (Luco [2019]).…”

Ordoliberal theory and gas market in Germany within the framework of international energy cooperation

“…At the same time, there is a contradiction resulting from the markets liberalization. Studies conducted by the National Energy Security Fund show that natural gas prices for enterprises have decreased, but at the same time the burden on retail consumers (householders) has increased significantly [9]. From 2008 to 2012, prices for final consumers have grown on a par by 40% across the EU.…”