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Rockets and feathers: Asymmetric pricing and consumer search - Evidence from electricity retailing

Sven Heim

No 16-070, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: In many markets prices react stronger to rising than to falling costs. This asymmetric cost pass-through is still not fully understood, but recent theories suggest that asymmetric adjustments of consumers’ search efforts to rising and to falling prices may help to explain this. I use novel panel data to investigate the interaction of consumer search intensity, pricing and cost pass-through in the German residential electricity markets. I find that consumers search slightly more when prices rise but drastically decrease search efforts when they fall. Moreover, I find direct evidence that cost pass-through heavily depends on consumers’ search efforts.

Keywords: Consumer Search; Cost Pass-through; Rockets and Feathers (search for similar items in EconPapers)
JEL-codes: D83 L11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-ene, nep-eur, nep-mkt and nep-reg
Date: 2019
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