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Does Energy Consumption Respond to Price Shocks? Evidence from a Regression-Discontinuity Design

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  • Paulo Bastos
  • Lucio Castro
  • Julian Cristia
  • Carlos Scartascini

Abstract

type="main"> We exploit unique features of a recently introduced tariff schedule for natural gas in Buenos Aires to estimate the short-run impact of price shocks on residential energy utilization. The schedule induces a non-linear and non-monotonic relationship between households' accumulated consumption and unit prices, thus generating exogenous price variation, which we exploit in a regression-discontinuity design. We find that a price increase causes a prompt and significant decline in gas consumption. The results also indicate that consumers respond more to recent past bills than to expected prices, which argues against an assumption of perfect awareness of complex price schedules by consumers.

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  • Paulo Bastos & Lucio Castro & Julian Cristia & Carlos Scartascini, 2015. "Does Energy Consumption Respond to Price Shocks? Evidence from a Regression-Discontinuity Design," Journal of Industrial Economics, Wiley Blackwell, vol. 63(2), pages 249-278, June.
    • Handle: RePEc:bla:jindec:v:63:y:2015:i:2:p:249-278
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    5. Gerard, Francois, 2013. "What Changes Energy Consumption, and for How Long? New Evidence from the 2001 Brazilian Electricity Crisis," RFF Working Paper Series dp-13-06, Resources for the Future.

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    More about this item

    JEL classification:

    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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