Assistance to electricity consumers with price misperception

Jérôme Renault () and Claude Crampes
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Jérôme Renault: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Claude Crampes: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: Electricity is consumed continuously night and day and is not storable at large scale. Consequently, in an electricity industry organized and managed efficiently, demand should be tightly responsive to time-varying prices. We explore the consequences of the limited ability of electricity consumers to use price signals in their decisions to withdraw energy from the grid and the advantages of an assistance service that can correct this bias. Depending on the statistical distribution of price misperception types, we determine the allocation of assistance that allows to decrease total consumption and the outcome of different market structures. Because of the impossibility of distinguishing between consumers who underestimate and those who overestimate electricity prices, we show that it may be suboptimal to organize a market for assistance. We also show that it is less efficient to rely on a private integrated monopoly than on two separate private monopolies, one for assistance, the other for energy.

Keywords: C72 D24 D47 L23 L94 demand response electricity energy saving quasi rationality consumers screening smart appliances market design; C72; D24; D47; L23; L94 demand response; electricity; energy saving; quasi rationality; consumers screening; smart appliances; market design (search for similar items in EconPapers)
Date: 2025-01-25
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