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Market Liberalization: Price Dispersion, Price Discrimination and Consumer Search in the German Electricity Markets

Author

Listed:
  • Gugler, Klaus
  • Heim, Sven
  • Janssen, Maarten
  • Liebensteiner, Mario

Abstract

We study how consumer search affects pricing in markets with incumbents and entrants using panel data on German electricity retail markets. Consumers observe the baseline price of the incumbent and decide whether or not to search. Incumbent providers can price discriminate between searching and loyal consumers. Empirically we show that local incumbents increase their baseline rate while entrants decrease their tariffs if consumer search increases. Moreover, the incumbent price discriminates more strongly in markets with more consumer search. Using a theoretical model, we show that these pricing patterns are consistent with the strategic interaction of profit-maximizing firms.

Suggested Citation

  • Gugler, Klaus & Heim, Sven & Janssen, Maarten & Liebensteiner, Mario, 2018. "Market Liberalization: Price Dispersion, Price Discrimination and Consumer Search in the German Electricity Markets," CEPR Discussion Papers 13197, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:13197
    as

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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    electricity; price discrimination; price dispersion; search;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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