Price transparency in residential electricity: experiments for regulatory policy

January 29, 2018 | Journal Article

Authors: Pete Lunn , Marek Bohacek
Journal of Behavioral Economics for Policy , Vol. 1, No. 2, 2017, pp. 31-37

We report two laboratory studies conducted in collaboration with a national energy regulator. The first tested whether consumers have difficulties when confronted with unit prices expressed as discounts from standard rates that vary between suppliers. The results imply that such discounts bias decisions and that percentage discounts reduce consumers’ ability to integrate product information. The second study pretested an intervention: a mandatory “Estimated Annual Bill” (EAB) calculated for a customer with average usage. The results indicate that the EAB is likely to help consumers to assess the value of advertised packages, to choose packages with lower unit rates, and to integrate product information accurately. In addition to providing evidence for policy, our findings are consistent with decision-making mechanisms that give increased weight to product information that is easy to process.

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  • Publication Details

    Journal Article

    ESRI Series Number: 2018/3
    Research Area: Behavioural Economics
    Date of Publication: January 29, 2018
    Published Online: December 11, 2017
    Publisher: The Society for the Advancement of Behavioral Economics (SABE)
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