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Consumer inertia and firm incumbency in liberalised retail electricity markets: an empirical investigation

Author

Listed:
  • Massimo Dragotto

    (Dept. of Economics and Management, University of Padova, Italy)

  • Marco Magnani

    (Dept. of Economics and Management, University of Padova, Italy and Italian Regulatory Authority for Energy, Network and the Environment (ARERA))

  • Paola Valbonesi

    (Dept. of Economics and Management, University of Padova, Italy and Higher School of Economics, National Research University, (HSE-NRU), Moscow)

Abstract

By exploiting an original 4-year dataset on the Italian retail electricity market, we investigate the relationship between firm incumbency — measured by market concentration at the regional level — and consumer inertia — identified by the yearly percentage of consumers switching providers and/or contract, both from the regulated to the free market and within the free market. Our main results show that i) regions recording stronger firm incumbency exhibit larger consumer inertia in leaving the regulated market, this effect being reinforced by the number of active free market retailers; ii) switching by consumers who already are in the free market is, instead, positively affected by firm incumbency. In light of these results, we provide prescriptions for policymakers targeting the migration of consumers towards free-market contracts and, consequently, full energy market liberalisation.

Suggested Citation

  • Massimo Dragotto & Marco Magnani & Paola Valbonesi, 2021. "Consumer inertia and firm incumbency in liberalised retail electricity markets: an empirical investigation," "Marco Fanno" Working Papers 0277, Dipartimento di Scienze Economiche "Marco Fanno".
    • Handle: RePEc:pad:wpaper:0277
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    References listed on IDEAS

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    More about this item

    Keywords

    Electricity Retail Markets; Liberalisation in Electricity Markets; Incumbency; Consumer Behaviour;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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