Behavioral interventions and market efficiency: The case of a volatile retail electricity market

Rimvydas Baltaduonis, Jūratė Jaraitė and Andrius Kažukauskas

Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), 2025, vol. 114, issue C

Abstract: Numerous field experiments have demonstrated that various monetary and informational incentives encourage demand response by increasing awareness about peak electricity prices and potentially inefficient energy use. However, very little is known about the effects of such interventions on overall market efficiency. We conducted a laboratory experiment with 200 participants to test the effects of different interventions on consumer decisions and overall market efficiency in a market reminiscent of a retail electricity market. We investigate two types of incentives—monetary information in the form of notifications about surge prices and non-monetary informational incentives in the form of peer comparisons—separately and together. We find that notifications about surge prices are effective interventions for reducing resource use and increasing market efficiency during surge-price periods. During these periods, the combination of peak-price notifications and peer-comparison information exhibits the highest efficiency.

Keywords: Electricity; Laboratory experiment; Market efficiency; Peak prices; Peer comparison; Price notifications (search for similar items in EconPapers)
JEL-codes: C92 D61 D91 L94 Q41 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:soceco:v:114:y:2025:i:c:s2214804324001654

DOI: 10.1016/j.socec.2024.102328

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