An empirical model of the decision to switch between electricity price contracts

Gauthier Lanot and Mattias Vesterberg ()
Additional contact information
Mattias Vesterberg: Department of Economics, Umeå University, Postal: Department of Economics, Umeå University, S 901 87 Umeå, Sweden, http://www.econ.umu.se

No 951, Umeå Economic Studies from Umeå University, Department of Economics

Abstract: We present a novel model for a time series of individual binary decisions which depends on the history of prices. The model is based on the Bayesian learning procedure which is at the core of sequential decision making.

We show that the model capture dependence on past events and past priors in a straightforward fashion, the model capture some dependence on initial condition, here in the form of the prior at the start of the decision period, and that estimation through maximum likelihood is straightforward.

We estimate the parameters of the model on a sample of Swedish households who have to decide over time between competing electricity contracts. The estimated parameters suggest that households respond to prices by switching between contracts, and that the response can be rather substantial for alternative price processes

Keywords: Price; Contract Choice; Bayesian Learning; Time Series; Binary Decision; Survival analysis (search for similar items in EconPapers)
JEL-codes: C11 C41 D12 Q41 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2017-06-21
New Economics Papers: this item is included in nep-ene and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.usbe.umu.se/digitalAssets/198/198812_ues951.pdf (application/pdf)

Related works:
Journal Article: An empirical model of the decision to switch between electricity price contracts (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hhs:umnees:0951

Access Statistics for this paper

More papers in Umeå Economic Studies from Umeå University, Department of Economics Department of Economics, Umeå University, S-901 87 Umeå, Sweden. Contact information at EDIRC.
Bibliographic data for series maintained by David Skog ().