EconPapers    
Economics at your fingertips  
 

Do Consumers Respond to Marginal or Average Price? Evidence from Nonlinear Electricity Pricing

Koichiro Ito ()

American Economic Review, 2014, vol. 104, issue 2, 537-63

Abstract: Nonlinear pricing and taxation complicate economic decisions by creating multiple marginal prices for the same good. This paper provides a framework to uncover consumers' perceived price of nonlinear price schedules. I exploit price variation at spatial discontinuities in electricity service areas, where households in the same city experience substantially different nonlinear pricing. Using household-level panel data from administrative records, I find strong evidence that consumers respond to average price rather than marginal or expected marginal price. This suboptimizing behavior makes nonlinear pricing unsuccessful in achieving its policy goal of energy conservation and critically changes the welfare implications of nonlinear pricing.

JEL-codes: D12 L11 L94 L98 Q41 (search for similar items in EconPapers)
Date: 2014
Note: DOI: 10.1257/aer.104.2.537
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (266) Track citations by RSS feed

Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/aer.104.2.537 (application/pdf)
http://www.aeaweb.org/aer/app/10402/20121431_app.pdf (application/pdf)
http://www.aeaweb.org/aer/data/10402/20121431_data.zip (application/zip)
http://www.aeaweb.org/aer/ds/10402/20121431_ds.zip (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: Do Consumers Respond to Marginal or Average Price? Evidence from Nonlinear Electricity Pricing (2012) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:104:y:2014:i:2:p:537-63

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().

 
Page updated 2022-05-12
Handle: RePEc:aea:aecrev:v:104:y:2014:i:2:p:537-63