An Experimental Study of Monthly Electricity Demand (In)Elasticity

39 Pages Posted: 3 May 2018 Last revised: 20 May 2019

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 17, 2019

Abstract

We document substantial rigidity in household electricity demand in response to large price shocks. 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 for a full month. We show that the quantity of electricity consumed was unaffected by these discounts. Exploiting rich billing, smart meter, and survey data, we document responses that are much more inelastic than previously observed in scenarios that raise prices for a few hours or raise or lower prices for indefinitely-long periods of time. Our results hold even among subgroups that we ex-ante believed were most likely to respond.

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 17, 2019). 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

Register to save articles to
your library

Register

Paper statistics

Downloads
60
Abstract Views
383
rank
352,213
PlumX Metrics