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Alert the Inert? Switching Costs and Limited Awareness in Retail Electricity Markets

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  • Luisa Dressler
  • Stefan Weiergraeber

Abstract

We quantify how switching costs and limited awareness affect consumer inertia in liberalized retail electricity markets by developing and estimating a structural demand model using a novel dataset on electricity contract choices in Belgium. Our data allow us to disentangle different sources of inertia by using a rich combination of macromoments and micromoments. We find that consumers perceive contracts as differentiated and both limited awareness and switching costs hinder efficient choices. Our counterfactuals reveal substantial welfare gains from alleviating both frictions, in particular switching costs, and that a well-regulated monopoly can generate similar consumer surplus as the current deregulated market.

Suggested Citation

  • Luisa Dressler & Stefan Weiergraeber, 2023. "Alert the Inert? Switching Costs and Limited Awareness in Retail Electricity Markets," ULB Institutional Repository 2013/371820, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:ulb:ulbeco:2013/371820
    Note: SCOPUS: ar.j
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