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Deregulation and status quo bias: Evidence from stated and revealed switching behaviors in the electricity market in Japan

Kayo Murakami and Takanori Ida

Discussion papers from Graduate School of Economics , Kyoto University

Abstract: This study investigates consumers’ status quo bias against new alternatives after deregulation in the residential electricity market in Japan. We conducted two choice experiments using online surveys before and after deregulation, and analyzed the relationship between consumers’ stated preferences and their revealed switching behaviors. The results indicate that the average Japanese consumer experiences status quo bias in electricity plan choice; consumers preferred to remain with their default provider despite the obvious 5% bill savings that could be gained from switching to a new provider. Moreover, respondents who did not switch in the real market became twice as attached to their default plan after their actual decision. In addition, respondents who switched soon after deregulation had a higher stated preference for renewable energy sources. This implies that new electricity plans that enhance clean energy have more potential to moderate consumer status quo bias in electricity plan choice. By simulating the potential share of new providers in the liberalized market, we found that a 50% renewable-energy plan has a larger potential market share than a plan that offers a 7% bill reduction under price competition.

New Economics Papers: this item is included in nep-com, nep-dcm, nep-ene and nep-reg
Date: 2019-04
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