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Households' switching behavior between electricity suppliers in Sweden

  • Ek, Kristina
  • Söderholm, Patrik

The overall purpose of this paper is to analyze the factors affecting households' decisions to: (a) switch to a new electricity supplier; and (b) actively renegotiate the electricity contract with the prevailing supplier. The study is based on 536 survey responses from Swedish households and they are analyzed econometrically using probit regression techniques. The analysis is based on a theoretical framework, which embraces both economic and psychological motives behind household decision-making. The results show that households that anticipate significant economic benefits from choosing a more active behavior are also more likely to purse this, while those with smaller potential gains (e.g., households without electric heating) are less likely to change supplier and/or renegotiate their contracts. The impact of overall electricity costs and knowledge about these is particularly important for the latter decision, while respondents that perceive relatively high search and information costs are less likely to switch to an alternative electricity supplier. Moreover, constraints on time, attention, and the ability to process information, may lead to optimizing analyses being replaced by imprecise routines and rules of thumb, and the benefits of the status quo appear to represent one of those simplifying rules. This also opens up for other influences on households' activity such as social interaction and media discourses that raise the attention level. Our results show that these influences are more likely to affect households' choice to switch to new service providers, i.e., the one area of the two investigated here that put the most demand on people's ability to search for and process information.

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Article provided by Elsevier in its journal Utilities Policy.

Volume (Year): 16 (2008)
Issue (Month): 4 (December)
Pages: 254-261

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Handle: RePEc:eee:juipol:v:16:y:2008:i:4:p:254-261
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