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Switching Energy Suppliers: It’s Not All About the Money

Abstract:
Many consumers do not take advantage of lower energy prices available in liberalized retail markets. We provide evidence to explain why consumers may leave substantial amounts of “money on the table” in this way. We observe real decisions made by over 7,000 consumers in a collective switching auction, supplemented by their responses to a survey. We identify factors which may inhibit switching and show that expectations of high switching rates in an unregulated market may be unrealistic. Our findings have important implications for the design and regulation of energy markets, including imposition of price caps on “default” retail tariffs in 2019 in the UK and parts of Australia.

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Keywords: Retail energy market, Switching suppliers, Probit models, Behavioral consumers

DOI: 10.5547/01956574.42.3.ddel

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Published in Volume 42, Number 3 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.

 

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