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Why Consumers Switch Energy Suppliers: The Role of Individual Attitudes

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Abstract:
Since 2008, fewer customers switched suppliers in British electricity and gas markets despite the potential for financial gains, suggesting that psychological factors may affect switching behaviors. Using a unique nation-wide British survey, we explore the influence of consumers' attitudes and perceptions on switching behaviors and assess the differences in switching propensity across different groups. Support for simplifying energy tariffs, professed less difficulty in understanding energy bills, expected difficulty in changing suppliers and lack of attention to the issue of energy prices are associated with lower switching activity. At a time of high saliency, political party voting intention was strongly related to switching. Unlike the bivariate analyses conducted by the regulator and the competition authority, our multivariate analysis show few demographic factors affect the likelihood of switching except for educational attainment and tariff payment patterns. Remedies aiming to encourage switching cannot be targeted correctly unless the supporting analysis is robust to alternative model specifications.

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Energy Specializations: Electricity – Markets and Prices ; Electricity – Policy and Regulation; Natural Gas – Markets and Prices; Natural Gas – Policy and Regulation

JEL Codes: Q40: Energy: General, Q41: Energy: Demand and Supply; Prices

Keywords: Retail energy markets, Switching suppliers, Household behavior, Logit model

DOI: https://doi.org/10.5547/01956574.38.6.hxia

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Published in Volume 38, Number 6 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.

 

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