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The Effects of Dynamic Pricing of Electric Power on Consumer Behavior: A Propensity Score Analysis for Empirical Study on Nushima Island, Japan

Author

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  • Thanh Tam Ho

    (Graduate School of Economics, Ritsumeikan University, 1-1-1 Noji-Higashi, Kusatsu, Shiga 525-8577, Japan)

  • Sarana Shinkuma

    (Faculty of Economics, Ritsumeikan University, 1-1-1 Noji-Higashi, Kusatsu, Shiga 525-8577, Japan)

  • Koji Shimada

    (Faculty of Economics, Ritsumeikan University, 1-1-1 Noji-Higashi, Kusatsu, Shiga 525-8577, Japan)

Abstract

This study aimed to investigate the change of consumer behavior in electric power consumption after the application of dynamic pricing via real-time feedback. Afield experiment of dynamic pricing was carried out on Nushima Island, which is located in Hyogo Prefecture in central Japan. The panel data of hourly electric power consumption among 50 households (including 22 control households and 28 treated households) were collected from a baseline survey (14 days before the dynamic pricing experiment was conducted) and during the 14-day experimental period. Propensity score analysis with local linear matching was employed to analyze the average treatment effects of dynamic pricing on consumer behavior. The results report that dynamic pricing plays a crucial role in reducing consumers’ electric power consumption—by 9.6% compared to the pre-experimental period.

Suggested Citation

  • Thanh Tam Ho & Sarana Shinkuma & Koji Shimada, 2018. "The Effects of Dynamic Pricing of Electric Power on Consumer Behavior: A Propensity Score Analysis for Empirical Study on Nushima Island, Japan," Energies, MDPI, vol. 11(8), pages 1-22, August.
    • Handle: RePEc:gam:jeners:v:11:y:2018:i:8:p:2175-:d:164730
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    References listed on IDEAS

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    1. Thoa Thi Kim Nguyen & Koji Shimada & Yuki Ochi & Takuya Matsumoto & Hiroshi Matsugi & Takao Awata, 2016. "An Experimental Study of the Impact of Dynamic Electricity Pricing on Consumer Behavior: An Analysis for a Remote Island in Japan," Energies, MDPI, vol. 9(12), pages 1-22, December.
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    3. Faruqui, Ahmad, 2010. "The Ethics of Dynamic Pricing," The Electricity Journal, Elsevier, vol. 23(6), pages 13-27, July.
    4. Desai, Kinnary R. & Dutta, Goutam, 2013. "A Dynamic Pricing Approach on Electricity Prices in Indian Context," IIMA Working Papers WP2013-12-07, Indian Institute of Management Ahmedabad, Research and Publication Department.
    5. Faruqui, Ahmad & George, Stephen, 2005. "Quantifying Customer Response to Dynamic Pricing," The Electricity Journal, Elsevier, vol. 18(4), pages 53-63, May.
    6. Herter, Karen, 2007. "Residential implementation of critical-peak pricing of electricity," Energy Policy, Elsevier, vol. 35(4), pages 2121-2130, April.
    7. James J. Heckman & Hidehiko Ichimura & Petra Todd, 1998. "Matching As An Econometric Evaluation Estimator," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 65(2), pages 261-294.
    8. Isamu Matsukawa & Hiroshi Asano & Hitoshi Kakimoto, 2000. "Household Response to Incentive Payments for Load Shifting: A Japanese Time-of-Day Electricity Pricing Experiment," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 73-86.
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    Cited by:

    1. Brown, Marilyn A. & Chapman, Oliver, 2021. "The size, causes, and equity implications of the demand-response gap," Energy Policy, Elsevier, vol. 158(C).
    2. Hye Yoon Song & Gyu Sub Lee & Yong Tae Yoon, 2019. "Optimal Operation of Critical Peak Pricing for an Energy Retailer Considering Balancing Costs," Energies, MDPI, vol. 12(24), pages 1-20, December.

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