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Pricing behaviour under competition in the UK electricity supply industry

  • Monica Giulietti
  • Jesus Otero
  • Michael Waterson

This paper investigates the evolution of electricity prices for domestic customers in the UK following the introduction of competition. The empirical analysis is based on a panel data set containing detailed information about electricity supply prices over the period 1999 to 2006. The analysis examines the pricing patterns and draws inferences concerning the benefits of incumbency and the gains from search. The econometric analysis of persistence and price dispersion provides rather limited support for the view that the market is becoming more competitive and also indicates that there remain significant potential benefits to consumers from searching alternative suppliers. Copyright 2010 Oxford University Press 2009 All rights reserved, Oxford University Press.

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Article provided by Oxford University Press in its journal Oxford Economic Papers.

Volume (Year): 62 (2010)
Issue (Month): 3 (July)
Pages: 478-503

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Handle: RePEc:oup:oxecpp:v:62:y:2010:i:3:p:478-503
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  7. Pesaran, M.H., 2003. "A Simple Panel Unit Root Test in the Presence of Cross Section Dependence," Cambridge Working Papers in Economics 0346, Faculty of Economics, University of Cambridge.
  8. Maarten C. W. Janssen & José Luis Moraga-González, 2004. "Strategic Pricing, Consumer Search and the Number of Firms," Review of Economic Studies, Oxford University Press, vol. 71(4), pages 1089-1118.
  9. Pasaran, M.H. & Im, K.S. & Shin, Y., 1995. "Testing for Unit Roots in Heterogeneous Panels," Cambridge Working Papers in Economics 9526, Faculty of Economics, University of Cambridge.
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  16. Kwiatkowski, Denis & Phillips, Peter C. B. & Schmidt, Peter & Shin, Yongcheol, 1992. "Testing the null hypothesis of stationarity against the alternative of a unit root : How sure are we that economic time series have a unit root?," Journal of Econometrics, Elsevier, vol. 54(1-3), pages 159-178.
  17. Burdett, Kenneth & Judd, Kenneth L, 1983. "Equilibrium Price Dispersion," Econometrica, Econometric Society, vol. 51(4), pages 955-69, July.
  18. Morgan, John & Orzen, Henrik & Sefton, Martin, 2006. "An experimental study of price dispersion," Games and Economic Behavior, Elsevier, vol. 54(1), pages 134-158, January.
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  20. Kaddour Hadri, 1999. "Testing For Stationarity In Heterogeneous Panel Data," Research Papers 1999_04, University of Liverpool Management School.
  21. Lee, Hsiu-Yun & Wu, Jyh-Lin, 2001. "Mean Reversion of Inflation Rates: Evidence from 13 OECD Countries," Journal of Macroeconomics, Elsevier, vol. 23(3), pages 477-487, July.
  22. Han Hong & Matthew Shum, 2006. "Using price distributions to estimate search costs," RAND Journal of Economics, RAND Corporation, vol. 37(2), pages 257-275, 06.
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