IDEAS home Printed from https://ideas.repec.org/a/sae/enejou/v42y2021i2p205-222.html
   My bibliography  Save this article

An Experimental Study of Monthly Electricity Demand (In)elasticity

Author

Listed:
  • David P. Byrne
  • Andrea La Nauze
  • Leslie A. Martin

Abstract

We document substantial rigidity in household electricity demand in response to large price shocks. We partnered with an electricity retailer to run a field experiment in which randomly-selected households received discounts of up to 50% on their total electricity bill or up to 95% off their per unit cost of electricity for a full month. We show that the quantity of electricity consumed was unaffected by these discounts. Exploiting rich billing, smart meter, and survey data, we document responses that are much more inelastic than previously observed in scenarios that raise prices for a few hours or raise or lower prices for indefinitely-long periods of time. Our results hold even among subgroups that we ex-ante believed were most likely to respond.

Suggested Citation

  • David P. Byrne & Andrea La Nauze & Leslie A. Martin, 2021. "An Experimental Study of Monthly Electricity Demand (In)elasticity," The Energy Journal, , vol. 42(2), pages 205-222, March.
    • Handle: RePEc:sae:enejou:v:42:y:2021:i:2:p:205-222
    DOI: 10.5547/01956574.42.2.dbyr
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.5547/01956574.42.2.dbyr
    Download Restriction: no
    File URL: https://libkey.io/10.5547/01956574.42.2.dbyr?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Agustin J. Ros, 2017. "An Econometric Assessment of Electricity Demand in the United States Using Utility-specific Panel Data and the Impact of Retail Competition on Prices," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    2. James B. Bushnell & Erin T. Mansur, 2005. "Consumption Under Noisy Price Signals: A Study Of Electricity Retail Rate Deregulation In San Diego," Journal of Industrial Economics, Wiley Blackwell, vol. 53(4), pages 493-513, December.
    3. Wichman, Casey J., 2014. "Perceived price in residential water demand: Evidence from a natural experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PA), pages 308-323.
    4. Dora L. Costa & Matthew E. Kahn, 2013. "Energy Conservation “Nudges” And Environmentalist Ideology: Evidence From A Randomized Residential Electricity Field Experiment," Journal of the European Economic Association, European Economic Association, vol. 11(3), pages 680-702, June.
    5. Koichiro Ito, 2014. "Do Consumers Respond to Marginal or Average Price? Evidence from Nonlinear Electricity Pricing," American Economic Review, American Economic Association, vol. 104(2), pages 537-563, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Simshauser, P., 2021. "Vulnerable households and fuel poverty: policy targeting efficiency in Australia’s National Electricity Market," Cambridge Working Papers in Economics 2129, Faculty of Economics, University of Cambridge.
    2. Cao, K.H. & Qi, H.S. & Li, R. & Woo, C.K. & Tishler, A. & Zarnikau, J., 2023. "An experiment in own-price elasticity estimation for non-residential electricity demand in the U.S," Utilities Policy, Elsevier, vol. 81(C).
    3. Simshauser, Paul, 2023. "The 2022 energy crisis: Fuel poverty and the impact of policy interventions in Australia's National Electricity Market," Energy Economics, Elsevier, vol. 121(C).
    4. Li, Raymond & Woo, Chi-Keung & Cox, Kevin, 2021. "How price-responsive is residential retail electricity demand in the US?," Energy, Elsevier, vol. 232(C).
    5. Simshauser, Paul, 2021. "Vulnerable households and fuel poverty: Measuring the efficiency of policy targeting in Queensland," Energy Economics, Elsevier, vol. 101(C).
    6. Lorraine Conway & David Prentice, 2020. "How Much do Households Respond to Electricity Prices? Evidence from Australia and Abroad," Economic Papers, The Economic Society of Australia, vol. 39(3), pages 290-311, September.
    7. Adélaïde Fadhuile & Daniel Llerena & Béatrice Roussillon, 2023. "Intrinsic Motivation to Promote the Development of Renewable Energy : A Field Experiment from Household Demand," Working Papers hal-03977597, HAL.
    8. Ding Du & Stephen A Karolyi, 2023. "Energy Transitions and Household Finance: Evidence from U.S. Coal Mining," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 12(4), pages 723-760.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Daniel A. Brent & Corey Lott & Michael Taylor & Joseph Cook & Kimberly Rollins & Shawn Stoddard, 2020. "What Causes Heterogeneous Responses to Social Comparison Messages for Water Conservation?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 77(3), pages 503-537, November.
    2. Daniel A. Brent & Corey Lott & Michael Taylor & Joseph Cook & Kim Rollins & Shawn Stoddard, 2017. "Are Normative Appeals Moral Taxes? Evidence from a Field Experiment on Water Conservation," Departmental Working Papers 2017-07, Department of Economics, Louisiana State University.
    3. Brent, Daniel A. & Friesen, Lana & Gangadharan, Lata & Leibbrandt, Andreas, 2017. "Behavioral Insights from Field Experiments in Environmental Economics," International Review of Environmental and Resource Economics, now publishers, vol. 10(2), pages 95-143, May.
    4. Neidell, Matthew & Uchida, Shinsuke & Veronesi, Marcella, 2019. "Be Cautious with the Precautionary Principle: Evidence from Fukushima Daiichi Nuclear Accident," IZA Discussion Papers 12687, Institute of Labor Economics (IZA).
    5. Singhal, Puja, 2024. "Inform me when it matters: Cost salience, energy consumption, and efficiency investments," Energy Economics, Elsevier, vol. 133(C).
    6. Broberg, Thomas & Kažukauskas, Andrius, 2021. "Information policies and biased cost perceptions - The case of Swedish residential energy consumption," Energy Policy, Elsevier, vol. 149(C).
    7. Neidell, Matthew & Uchida, Shinsuke & Veronesi, Marcella, 2021. "The unintended effects from halting nuclear power production: Evidence from Fukushima Daiichi accident," Journal of Health Economics, Elsevier, vol. 79(C).
    8. Hunt Allcott & Judd B. Kessler, 2015. "The Welfare Effects of Nudges: A Case Study of Energy Use Social Comparisons," NBER Working Papers 21671, National Bureau of Economic Research, Inc.
    9. Todd D. Gerarden & Richard G. Newell & Robert N. Stavins, 2017. "Assessing the Energy-Efficiency Gap," Journal of Economic Literature, American Economic Association, vol. 55(4), pages 1486-1525, December.
    10. Wichman, Casey J. & Taylor, Laura O. & von Haefen, Roger H., 2016. "Conservation policies: Who responds to price and who responds to prescription?," Journal of Environmental Economics and Management, Elsevier, vol. 79(C), pages 114-134.
    11. Marie-Estelle Binet & María Ángeles García-Valiñas & Michel Paul, 2020. "Price perception under blocks tariff schemes : a comparison of drinking water consumption beliefs and behaviors and recommandations for efficient nudging policies," Post-Print hal-03192716, HAL.
    12. Tonke, Sebastian, 2020. "Imperfect Procedural Knowledge: Evidence from a Field Experiment to Encourage Water Conservation," VfS Annual Conference 2020 (Virtual Conference): Gender Economics 224536, Verein für Socialpolitik / German Economic Association.
    13. Manuel Frondel and Gerhard Kussel, 2019. "Switching on Electricity Demand Response: Evidence for German Households," The Energy Journal, International Association for Energy Economics, vol. 0(Number 5).
    14. Gilbert, Ben & Graff Zivin, Joshua, 2014. "Dynamic salience with intermittent billing: Evidence from smart electricity meters," Journal of Economic Behavior & Organization, Elsevier, vol. 107(PA), pages 176-190.
    15. Brent, Daniel A. & Ward, Michael B., 2019. "Price perceptions in water demand," Journal of Environmental Economics and Management, Elsevier, vol. 98(C).
    16. Wichman, Casey J., 2017. "Information provision and consumer behavior: A natural experiment in billing frequency," Journal of Public Economics, Elsevier, vol. 152(C), pages 13-33.
    17. Asensio, Omar Isaac & Delmas, Magali A., 2016. "The dynamics of behavior change: Evidence from energy conservation," Journal of Economic Behavior & Organization, Elsevier, vol. 126(PA), pages 196-212.
    18. Xuejuan Su, 2015. "Have customers benefited from electricity retail competition?," Journal of Regulatory Economics, Springer, vol. 47(2), pages 146-182, April.
    19. Wichman, Casey, 2024. "Efficiency, Equity, and Cost-Recovery Trade-Offs in Municipal Water Pricing," RFF Working Paper Series 24-18, Resources for the Future.
    20. Nathan DeMaagd & Michael J. Roberts, 2020. "Estimating Water Demand Using Price Differences of Wastewater Services," Working Papers 202019, University of Hawaii at Manoa, Department of Economics.

    More about this item

    Keywords

    Price Elasticity; Energy Demand; Field Experiment;
    All these keywords.

    JEL classification:

    • F0 - International Economics - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:enejou:v:42:y:2021:i:2:p:205-222. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.