Measuring Switching Costs in the Italian Residential Electricity Market

Marco Magnani (), Fabio Manenti () and Paola Valbonesi
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Marco Magnani: DSEA, University of Padova and Italian Regulatory Authority for Energy, Network and the Environment (ARERA)

No 258, "Marco Fanno" Working Papers from Dipartimento di Scienze Economiche "Marco Fanno"

Abstract: Liberalised retail electricity markets in European countries are still characterised by low consumer engagement, especially where regulated prices are still in place. Using an original dataset of Italian prices and the number of residential consumers, we study the presence and magnitude of switching costs – i.e., costs incurred by consumers when changing supplier and a source of inertia – in the free market. We find that switching from the incumbent to any other competitor in the free market involves high costs – almost as high as yearly energy expenditure – while leaving 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 the market is fully liberalised and regulated prices are phased out.

Keywords: Electricity Retail Markets; liberalisation in Electricity Markets; Switching Cost; Consumer Behaviour; Firm reputation (search for similar items in EconPapers)
JEL-codes: D12 L94 L98 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2022-03
New Economics Papers: this item is included in nep-com, nep-ene, nep-eur and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: Measuring Switching Costs in the Italian Residential Electricity Market (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:pad:wpaper:0258

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