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Quantifying Heterogeneity in the Price Elasticity of Residential Natural Gas

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  • Edward Rubin
  • Maximilian Auffhammer

Abstract

We exploit a spatial discontinuity in two natural gas utilities’ service territories—combined with variation in their block-rate pricing structure and a difference in how prima facie determined wholesale prices are differentially passed through to consumers—to identify average, seasonal, and income-specific own-price elasticities of residential natural gas demand. We estimate an average elasticity ranging from 0.15 to 0.19 depending on the measure of price used. We further estimate that this elasticity varies substantially across seasons, income groups, and their interaction. We find no significant difference in consumers’ responses to average versus marginal prices.

Suggested Citation

  • Edward Rubin & Maximilian Auffhammer, 2024. "Quantifying Heterogeneity in the Price Elasticity of Residential Natural Gas," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 11(2), pages 319-357.
    • Handle: RePEc:ucp:jaerec:doi:10.1086/726017
    DOI: 10.1086/726017
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    Cited by:

    1. Kilian, Lutz & Zhou, Xiaoqing, 2024. "Heterogeneity in the pass-through from oil to gasoline prices: A new instrument for estimating the price elasticity of gasoline demand," Journal of Public Economics, Elsevier, vol. 232(C).

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