Power to Choose? An Analysis of Consumer Inertia in the Residential Electricity Market / Ali Hortaçsu, Seyed Ali Madanizadeh, Steven L. Puller.

Format:

Book

Author/Creator:

Hortaçsu, Ali.

Contributor:

National Bureau of Economic Research.

Madanizadeh, Seyed Ali.

Puller, Steven L.

Series:

Working Paper Series (National Bureau of Economic Research) no. w20988.

NBER working paper series no. w20988

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2015.

Summary:

Many jurisdictions around the world have deregulated utilities and opened retail markets to competition. However, inertial decisionmaking can diminish consumer benefits of retail competition. Using household-level data from the Texas residential electricity market, we document evidence of consumer inertia. We estimate an econometric model of retail choice to measure two sources of inertia: (1) search frictions/inattention, and (2) a brand advantage that consumers afford the incumbent. We find that households rarely search for alternative retailers, and when they do search, households attach a brand advantage to the incumbent. Counterfactual experiments show that low-cost information interventions can notably increase consumer surplus.

Notes:

Print version record

February 2015.