Switching Energy Suppliers: It's Not All about the Money

Abstract

Liberalised retail energy markets present an apparent puzzle: when offered the chance to buy a homogeneous product at a lower price, many consumers appear to leave ‘money on the table’. We observe the decisions made by over 7,000 consumers in a collective switching exercise and find that seemingly suboptimal consumer behaviour may be understood better if a sufficiently rich range of non-monetary ‘switching costs’ are identified. We discuss some policy implications for the expectations of consumer response in designing and regulating markets.

Keywords: Retail Energy Market, Switching Suppliers, Probit Models, Behavioural Consumers

JEL Classification: D12, D83, C25, C26, L94, L95