Towards understanding the role of price in residential electricity choices: Evidence from a natural experiment

Katrina Jessoe, David Rapson and Jeremy B. Smith

Journal of Economic Behavior & Organization, 2014, vol. 107, issue PA, 191-208

Abstract: We examine a choice setting in which residential electricity consumers may respond to non-financial incentives in addition to prices. Using data from a natural field experiment that exposed some households to a change in their electricity rates, we find that households reduced electricity usage in response to a contemporaneous decrease in electricity prices. This provides clear evidence that other factors – potentially encompassing non-monetary and dynamic considerations – can influence consumer choice, and even dominate the static price response in some cases. A comprehensive understanding of household behavior in energy markets is essential for the effective implementation of market-based energy and environmental policies. The documentation of our result and others like it is a necessary step in achieving such an understanding.

Keywords: Consumer choice; Energy; Natural experiment (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:107:y:2014:i:pa:p:191-208

DOI: 10.1016/j.jebo.2014.03.009

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