Consumer Preference Not to Choose: Methodological and Policy Implications
AbstractResidential consumers remain reluctant to choose new electricity suppliers. Even the most successful jurisdictions, four U.S. states and other countries, have had to adopt extensive consumer education procedures that serve largely to confirm that choosing electricity suppliers is daunting. Electricity is not unique in this respect; numerous studies find that consumers are generally reluctant to switch brands, even when they are well-informed about product characteristics. If consumers prefer not to choose, opening regulated markets can reduce welfare, even for some consumers who do switch, as the incumbent can exploit this preference by raising price above the formerly regulated level. Policies to open markets might be successful even if limited to industrial and commercial customers, with residential prices based on those in nominally competitive wholesale markets.
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Bibliographic InfoPaper provided by Resources For the Future in its series Discussion Papers with number dp-05-51.
Date of creation: 11 Nov 2005
Date of revision:
electricity markets; deregulation; consumer choice; residential markets;
Find related papers by JEL classification:
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
- B40 - Schools of Economic Thought and Methodology - - Economic Methodology - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-01-24 (All new papers)
- NEP-COM-2006-01-24 (Industrial Competition)
- NEP-ENE-2006-01-24 (Energy Economics)
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