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Encouraging consumer activity through automatic switching of the electricity contract - A field experiment

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  • Feldhaus, Christoph
  • Lingens, Jörg
  • Löschel, Andreas
  • Zunker, Gerald

Abstract

Consumer behavior in terms of regular searching for and switching between suppliers is key to induce competition in markets and to increase efficiency. In the electricity market, though, we observe very little switching activity. One way to engage consumers may be to automate the choice of the contract. However, little is known about the determinants of consumers’ use of automation services. To address this question, we present a stylized model of how households take their decision to enroll into an automation service and, based on that, run a field experiment with about 2600 customers of a German service provider that offers its customers to automatically switch between electricity contracts on their behalf. We provide evidence that arguments derived from our stylized model that aim to increase the take up of the automation service can be ineffective or even have detrimental effects. Thereby, we provide evidence that it might be difficult to realize potential efficiency-gains of a digitized world.

Suggested Citation

  • Feldhaus, Christoph & Lingens, Jörg & Löschel, Andreas & Zunker, Gerald, 2022. "Encouraging consumer activity through automatic switching of the electricity contract - A field experiment," Energy Policy, Elsevier, vol. 164(C).
    • Handle: RePEc:eee:enepol:v:164:y:2022:i:c:s0301421522000805
    DOI: 10.1016/j.enpol.2022.112855
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    References listed on IDEAS

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    Cited by:

    1. Garrod, Luke & Li, Ruochen & Wilson, Christopher, 2023. "Automated switching services," MPRA Paper 118449, University Library of Munich, Germany.
    2. Garrod, Luke & Li, Ruochen & Wilson, Christopher, 2023. "Automated switching services," MPRA Paper 118492, University Library of Munich, Germany.
    3. Markus Dertwinkel-Kalt & Christian Wey, 2022. "Why “Energy Price Brakes” Encourage Moral Hazard, Raise Energy Prices, and Reinforce Energy Savings," CESifo Working Paper Series 10163, CESifo.
    4. Dertwinkel-Kalt, Markus & Wey, Christian, 2023. "Why Germany's Gas Price Brake Encourages Moral Hazard and Raises Gas Prices," VfS Annual Conference 2023 (Regensburg): Growth and the "sociale Frage" 277575, Verein für Socialpolitik / German Economic Association.
    5. Dertwinkel-Kalt, Markus & Wey, Christian, 2023. "Why "energy price brakes" encourage moral hazard, raise energy prices, and reinforce energy savings," DICE Discussion Papers 407, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).

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    More about this item

    Keywords

    Search and switching behavior; Field experiment; Automation service usage; Decision rights; Contract choices; Energy;
    All these keywords.

    JEL classification:

    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments

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