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Households' switching behavior between electricity suppliers in Sweden

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  • Ek, Kristina
  • Söderholm, Patrik

Abstract

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.

Suggested Citation

  • Ek, Kristina & Söderholm, Patrik, 2008. "Households' switching behavior between electricity suppliers in Sweden," Utilities Policy, Elsevier, vol. 16(4), pages 254-261, December.
  • Handle: RePEc:eee:juipol:v:16:y:2008:i:4:p:254-261
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Vesterberg, Mattias, 2017. "The effect of price on electricity contract choice," Umeå Economic Studies 941, Umeå University, Department of Economics.
    2. Xiaoping He & David Reiner, 2015. "Why Do More British Consumers Not Switch Energy Suppliers? The Role of Individual Attitudes," Cambridge Working Papers in Economics 1525, Faculty of Economics, University of Cambridge.
    3. Carin van der Cruijsen & Maaike Diepstraten, 2015. "Banking products: you can take them with you, so why don't you?," DNB Working Papers 490, Netherlands Central Bank, Research Department.
    4. Schleich, Joachim & Faure, Corinne & Gassmann, Xavier, 2017. "Household electricity contract and provider switching in the EU," Working Papers "Sustainability and Innovation" S14/2017, Fraunhofer Institute for Systems and Innovation Research (ISI).
    5. Vesterberg, Mattias, 2017. "Heterogeneity in price responsiveness of electricity: Contract choice and the role of media coverage," Umeå Economic Studies 940, Umeå University, Department of Economics.
    6. Vassileva, Iana & Odlare, Monica & Wallin, Fredrik & Dahlquist, Erik, 2012. "The impact of consumers’ feedback preferences on domestic electricity consumption," Applied Energy, Elsevier, pages 575-582.
    7. Lanot, Gauthier & Vesterberg, Mattias, 2017. "An empirical model of the decision to switch between electricity price contracts," Umeå Economic Studies 951, Umeå University, Department of Economics.
    8. Magdalena Six & Franz Wirl & Jaqueline Wolf, 2017. "Information as potential key determinant in switching electricity suppliers," Journal of Business Economics, Springer, pages 263-290.
    9. Moreno, Blanca & López, Ana J. & García-Álvarez, María Teresa, 2012. "The electricity prices in the European Union. The role of renewable energies and regulatory electric market reforms," Energy, Elsevier, vol. 48(1), pages 307-313.
    10. Maxim Alexandru, 2013. "Methodological Considerations Regarding The Segmentation Of Household Energy Consumers," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, pages 1775-1785.
    11. Heshmati, Almas, 2012. "Survey of Models on Demand, Customer Base-Line and Demand Response and Their Relationships in the Power Market," IZA Discussion Papers 6637, Institute for the Study of Labor (IZA).
    12. repec:kap:jfsres:v:52:y:2017:i:1:d:10.1007_s10693-017-0276-3 is not listed on IDEAS
    13. Hellmer, Stefan & Wårell, Linda, 2009. "On the evaluation of market power and market dominance--The Nordic electricity market," Energy Policy, Elsevier, vol. 37(8), pages 3235-3241, August.
    14. Anna Airoldi & Michele Polo, 2017. "Opening the Retail Electricity Markets: Puzzles, Drawbacks and Policy Options," IEFE Working Papers 97, IEFE, Center for Research on Energy and Environmental Economics and Policy, Universita' Bocconi, Milano, Italy.
    15. repec:eee:juipol:v:48:y:2017:i:c:p:12-21 is not listed on IDEAS
    16. Vassileva, Iana & Wallin, Fredrik & Dahlquist, Erik, 2012. "Understanding energy consumption behavior for future demand response strategy development," Energy, Elsevier, vol. 46(1), pages 94-100.
    17. repec:eee:enepol:v:110:y:2017:i:c:p:675-685 is not listed on IDEAS
    18. Söderholm, Patrik & Wårell, Linda, 2011. "Market opening and third party access in district heating networks," Energy Policy, Elsevier, vol. 39(2), pages 742-752, February.
    19. Yang, Yingkui, 2014. "Understanding household switching behavior in the retail electricity market," Energy Policy, Elsevier, vol. 69(C), pages 406-414.

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