Estimation of Search Frictions in the British Electricity Market

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.


Issue Date:
2010-08
Publication Type:
Working or Discussion Paper
Record Identifier:
http://ageconsearch.umn.edu/record/270998
Language:
English
Total Pages:
36
JEL Codes:
C14; D83; L13
Series Statement:
WERP 940




 Record created 2018-04-09, last modified 2018-04-09

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