Tail-risk Comprehension and Protection in Real-time Electricity Pricing: Experimental Evidence

Madeline Pretto
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Madeline Pretto: Monash University

Warwick-Monash Economics Student Papers from Warwick Monash Economics Student Papers

Abstract: Do households comprehend the nature of price tail-risks inherent to real-time electricity pricing plans? Through an incentivised online experiment, we find that a probabilistic risk disclosure elicits greater demand for real-time pricing (RTP) products relative to a low-risk fixed-price alternative, without improving comprehension of tail-risk in RTP. Participants also show a tendency to place low value on tail-risk protection. Finally, the experience of a bill shock improves risk comprehension and drives choice away from RTP, suggesting that personal experience plays a greater role in self-imposed risk protection than does a probabilistic risk disclosure. We discuss the implications these findings may have for regulators with a consumer protection mandate.

Keywords: Vietnam retail electricity market; block rate pricing; welfare effect; electricity externalities; demand function; cash transfer; quantity-based subsidy JEL Classification: D12; D63; Q41; Q48 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-ban, nep-ene, nep-exp, nep-reg, nep-rmg and nep-sea
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Persistent link: https://EconPapers.repec.org/RePEc:wrk:wrkesp:25

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