Alert the Inert? Switching Costs and Limited Awareness in Retail Electricity Markets

Luisa Dressler and Stefan Weiergraeber

American Economic Journal: Microeconomics, 2023, vol. 15, issue 1, 74-116

Abstract: We quantify how switching costs and limited awareness affect consumer inertia in liberalized retail electricity markets by developing and estimating a structural demand model using a novel dataset on electricity contract choices in Belgium. Our data allow us to disentangle different sources of inertia by using a rich combination of macromoments and micromoments. We find that consumers perceive contracts as differentiated and both limited awareness and switching costs hinder efficient choices. Our counterfactuals reveal substantial welfare gains from alleviating both frictions, in particular switching costs, and that a well-regulated monopoly can generate similar consumer surplus as the current deregulated market.

JEL-codes: D12 D83 L13 L43 L94 L98 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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DOI: 10.1257/mic.20190163

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