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Price Transparency in Residential Electricity: Experiments for Regulatory Policy

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  • Lunn, Pete

Abstract

We report two laboratory studies conducted in collaboration with a national energy regulator. The first tested whether consumers have difficulties when confronted with unit prices expressed as discounts from standard rates that vary between suppliers. The results imply that such discounts bias decisions and that percentage discounts reduce consumers' ability to integrate product information. The second study pretested an intervention: a mandatory "Estimated Annual Bill" (EAB) calculated for a customer with average usage. The results indicate that the EAB is likely to help consumers to assess the value of advertised packages, to choose packages with lower unit rates, and to integrate product information accurately. In addition to providing evidence for policy, our findings are consistent with decision-making mechanisms that give increased weight to product information that is easy to process.
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Suggested Citation

  • Lunn, Pete, 2018. "Price Transparency in Residential Electricity: Experiments for Regulatory Policy," Papers RB201804, Economic and Social Research Institute (ESRI).
    • Handle: RePEc:esr:wpaper:rb201804
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    Cited by:

    1. McGowan, Féidhlim, 2018. "The roaming regulation and the case for applying behavioural industrial organisation to EU competition policy," Papers WP598, Economic and Social Research Institute (ESRI).
    2. Regan, Mark & Keane, Claire & Walsh, John R, 2018. "Using behavioural experiments to pre-test policy," Papers BP2019/2, Economic and Social Research Institute (ESRI).
    3. Ravi Dutta-Powell & Min-Taec Kim & Cameron Tan, 2021. "I don't get it, but I like it: Detailed pricing information increases confidence, but decreases quality of decision making," Journal of Behavioral Economics for Policy, Society for the Advancement of Behavioral Economics (SABE), vol. 5(1), pages 61-76, Septembre.
    4. Hegarty, Tadgh & Whelan, Karl, 2023. "Do Gamblers Understand Complex Bets? Evidence From Asian Handicap Betting on Soccer," CEPR Discussion Papers 18153, C.E.P.R. Discussion Papers.

    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D18 - Microeconomics - - Household Behavior - - - Consumer Protection

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