Michael Waterson on Estimation of search frictions in the British electricity market

Speaker:  Michael Waterson - University of Warwick
  Tuesday, April 5, 2011 at 12:30 PM Biblioteca DSE, Palazzina 32 ex caserma Passalacqua

This paper studies consumer search and pricing behaviour in the British domestic electricity
market following its opening to competition in 1999. We develop a sequential search model in
which an incumbent and an entrant group compete for consumers who find it costly to obtain
information on prices other than from their current supplier. We use a large data set on prices
and input costs to structurally estimate the model. Our estimates indicate that consumer search
costs must be relatively high in order to rationalize observed pricing patterns. We confront our
estimates with observed switching behaviour and find they match well.

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Paper  pdfpdf (it, 508 KB, 06/04/11)

Programme Director
Angelo Zago

Publication date
March 14, 2011

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