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Behavioral interventions and market efficiency: The case of a volatile retail electricity market

Author

Listed:
  • Baltaduonis, Rimvydas
  • Jaraitė, Jūratė
  • Kažukauskas, Andrius

Abstract

Numerous field experiments have demonstrated that various monetary and informational incentives encourage demand response by increasing awareness about peak electricity prices and potentially inefficient energy use. However, very little is known about the effects of such interventions on overall market efficiency. We conducted a laboratory experiment with 200 participants to test the effects of different interventions on consumer decisions and overall market efficiency in a market reminiscent of a retail electricity market. We investigate two types of incentives—monetary information in the form of notifications about surge prices and non-monetary informational incentives in the form of peer comparisons—separately and together. We find that notifications about surge prices are effective interventions for reducing resource use and increasing market efficiency during surge-price periods. During these periods, the combination of peak-price notifications and peer-comparison information exhibits the highest efficiency.

Suggested Citation

  • Baltaduonis, Rimvydas & Jaraitė, Jūratė & Kažukauskas, Andrius, 2025. "Behavioral interventions and market efficiency: The case of a volatile retail electricity market," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 114(C).
    • Handle: RePEc:eee:soceco:v:114:y:2025:i:c:s2214804324001654
    DOI: 10.1016/j.socec.2024.102328
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    More about this item

    Keywords

    Electricity; Laboratory experiment; Market efficiency; Peak prices; Peer comparison; Price notifications;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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