Working papers, Department of Economics, WU (Wirtschaftsuniversität Wien)
Non-Sequential Search, Competition and Price Dispersion in Retail Electricity
(), Sven Heim
() and Mario Liebensteiner
Abstract: We investigate the impact of consumer search and
competition on pricing strategies in Germany’s electricity retail. We
utilize a unique panel dataset on spatially varying search requests at
major online price comparison websites to construct a direct measure of
search intensity and combine this information with zip code level data on
electricity tariffs between 2011 and 2014. The paper stands out by
explaining price dispersion by differing pricing strategies of former
incumbents and entrant firms, which are distinct in their attributable
shares in informed versus uninformed consumers. Our empirical results
suggest causal evidence for an inverted U-shape effect of consumer search
intensity on price dispersion in a clearinghouse environment as in Stahl
(1989). The dispersion is caused by opposite pricing strategies of
incumbents and entrants, with incumbents initially increasing and entrants
initially decreasing tariffs as a reaction to more consumer search. We also
find an inverted U-shape effect of competition on price dispersion,
consistent with theoretical findings by Janssen and Moraga-González (2004).
Again, the effect can be explained by opposing pricing strategies of
incumbents and entrants.
Keywords: Search, Information, Competition, Price Dispersion, Electricity Retail; (follow links to similar papers)
JEL-Codes: D43,; D83,; L11,; L13,; Q40; (follow links to similar papers)
Before downloading any of the electronic versions below
you should read our statement on
for viewing Postscript files and the
Acrobat Reader for viewing and printing pdf files.
Report other problems with accessing this service to Sune Karlsson ()
or Helena Lundin ().
Design Joakim Ekebom