An Experimental Study of Monthly Electricity Demand (In)Elasticity

36 Pages Posted: 3 May 2018 Last revised: 27 May 2018

See all articles by David P. Byrne

David P. Byrne

The University of Melbourne

Andrea La Nauze

University of Pittsburgh - Department of Economics

Leslie A. Martin

University of Melbourne - Department of Economics

Date Written: May 21, 2018

Abstract

We partnered with an electricity retailer to run a field experiment in which randomly-selected households received discounts of up to 50% on their total electricity bill or up to 95% off their per unit cost of electricity. Over two months, we find that the quantity of electricity consumed by treatment households remained unchanged despite these discounts. Exploiting rich billing, smart meter, and survey data, we reject comparable price elasticity estimates from the literature, even among subgroups who were most likely to respond. Our results reveal substantial rigidity in household electricity demand in response to large transitory price shocks.

Keywords: Price Elasticity, Energy Demand, Field Experiment

JEL Classification: C93, L94, Q41

Suggested Citation

Byrne, David P. and La Nauze, Andrea and Martin, Leslie A., An Experimental Study of Monthly Electricity Demand (In)Elasticity (May 21, 2018). Available at SSRN: https://ssrn.com/abstract=3164697 or http://dx.doi.org/10.2139/ssrn.3164697

David P. Byrne (Contact Author)

The University of Melbourne ( email )

Level 4
111 Barry Street
Melbourne, Victoria 3010
Australia

HOME PAGE: http://sites.google.com/view/dprbyrne/

Andrea La Nauze

University of Pittsburgh - Department of Economics ( email )

4901 Wesley Posvar Hall
230 South Bouquet Street
Pittsburgh
United States

Leslie A. Martin

University of Melbourne - Department of Economics ( email )

Melbourne, 3010
Australia

HOME PAGE: http://lesliemartin.org

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