The price elasticity of electricity demand when marginal incentives are very large

Gauthier Lanot and Mattias Vesterberg ()
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Mattias Vesterberg: Department of Economics, Umeå University, Postal: Department of Economics, Umeå University, S 901 87 Umeå, Sweden, https://www.umu.se/handelshogskolan

No 968, Umeå Economic Studies from Umeå University, Department of Economics

Abstract: Using unique data on Swedish households, we measure the price elas- ticity of electricity demand for households facing a mandatory non-linear distribution tariffs where households are charged based on their maximum consumption during a month, and where the marginal incentives are very large. We estimate the price elasticity using both 2SLS and bunching esti- mators, and we find that the price elasticity is smaller than what previous literature on electricity demand have found. Furthermore, we illustrate why charging households based on maxi- mum consumption during a month leads to weak incentives in the end of the month, and discuss alternative tariff designs.

Keywords: Demand flexibility; Non-linear pricing; Peak demand (search for similar items in EconPapers)
JEL-codes: D12 Q41 Q48 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2020-01-30
New Economics Papers: this item is included in nep-ene and nep-reg
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Journal Article: The price elasticity of electricity demand when marginal incentives are very large (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:umnees:0968

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