Quantifying Heterogeneity in the Price Elasticity of Residential Natural Gas

Edward Rubin and Maximilian Auffhammer

Journal of the Association of Environmental and Resource Economists, 2024, vol. 11, issue 2, 319 - 357

Abstract: We exploit a spatial discontinuity in two natural gas utilities’ service territories—combined with variation in their block-rate pricing structure and a difference in how prima facie determined wholesale prices are differentially passed through to consumers—to identify average, seasonal, and income-specific own-price elasticities of residential natural gas demand. We estimate an average elasticity ranging from 0.15 to 0.19 depending on the measure of price used. We further estimate that this elasticity varies substantially across seasons, income groups, and their interaction. We find no significant difference in consumers’ responses to average versus marginal prices.

Date: 2024
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