Data and Code for: Misunderstanding nonlinear prices: Evidence from a natural experiment on residential electricity demand

Principal Investigator(s):  View help for Principal Investigator(s) Blake Shaffer, University of Calgary

Version:  View help for Version V1

Name File Type Size Last Modified
  CODE 09/30/2019 01:19:PM
  DATA 09/30/2019 01:20:PM
  MATLAB 09/30/2019 01:20:PM
README.pdf application/pdf 328.4 KB 09/30/2019 09:22:AM

Project Citation: 

Shaffer, Blake. Data and Code for: Misunderstanding nonlinear prices: Evidence from a natural experiment on residential electricity demand. Nashville, TN: American Economic Association [publisher], 2020. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2020-07-23. https://doi.org/10.3886/E111481V1

Project Description

Summary:  View help for Summary This paper examines how consumers respond to nonlinear prices. Exploiting a natural experiment with electricity consumers in British Columbia, I find evidence that some households severely misunderstand nonlinear prices---incorrectly perceiving that the marginal price applies to all consumption, not simply the last unit. While small in number, the exaggerated responses by these households have a large effect in aggregate, masking an otherwise predominant response to average price. Previously largely unexplored in the literature, this type of misunderstanding has important economic, policy and methodological implications beyond electricity markets. I estimate the welfare loss for these households to be the equivalent of 10% of annual electricity expenditure.

Scope of Project

Subject Terms:  View help for Subject Terms Electricity demand; nonlinear prices; misperception; heterogeneity
JEL Classification:  View help for JEL Classification
      C23 Panel Data Models • Spatio-temporal Models
      C24 Truncated and Censored Models • Switching Regression Models • Threshold Regression Models
      C26 Instrumental Variables (IV) Estimation
      D12 Consumer Economics: Empirical Analysis
      Q41 Demand and Supply • Prices
Geographic Coverage:  View help for Geographic Coverage British Columbia
Time Period(s):  View help for Time Period(s) 2005 – 2013
Collection Date(s):  View help for Collection Date(s) 2005 – 2013
Universe:  View help for Universe All residential electricity accounts (households) in the City of New Westminster and the surrounding 3-digit postal codes served by BC Hydro.
Data Type(s):  View help for Data Type(s) administrative records data; program source code

Methodology

Unit(s) of Observation:  View help for Unit(s) of Observation Account (household)

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V1 [2020-07-23]

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