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Market Liberalization: Price Dispersion, Price Discrimination and Consumer Search in the German Electricity Markets

Klaus Gugler, Sven Heim, Maarten Janssen and Mario Liebensteiner

No 13197, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study how consumer search affects pricing in markets with incumbents and entrants using panel data on German electricity retail markets. Consumers observe the baseline price of the incumbent and decide whether or not to search. Incumbent providers can price discriminate between searching and loyal consumers. Empirically we show that local incumbents increase their baseline rate while entrants decrease their tariffs if consumer search increases. Moreover, the incumbent price discriminates more strongly in markets with more consumer search. Using a theoretical model, we show that these pricing patterns are consistent with the strategic interaction of profit-maximizing firms.

Keywords: electricity; price discrimination; price dispersion; search (search for similar items in EconPapers)
JEL-codes: D43 D83 L11 L13 Q40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-ene and nep-ind
Date: 2018-09
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