NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Seyed Ali Madanizadeh

Department of Economics
1126 E. 59th St.
Chicago, IL 60637

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Institutional Affiliation: University of Chicago

NBER Working Papers and Publications

February 2015Power to Choose? An Analysis of Consumer Inertia in the Residential Electricity Market
with Ali Horta├žsu, Steven L. Puller: w20988
Many jurisdictions around the world have deregulated utilities and opened retail markets to competition. However, inertial decisionmaking can diminish consumer benefits of retail competition. Using household-level data from the Texas residential electricity market, we document evidence of consumer inertia. We estimate an econometric model of retail choice to measure two sources of inertia: (1) search frictions/inattention, and (2) a brand advantage that consumers afford the incumbent. We find that households rarely search for alternative retailers, and when they do search, households attach a brand advantage to the incumbent. Counterfactual experiments show that low-cost information interventions can notably increase consumer surplus.

Published: Ali Horta├žsu & Seyed Ali Madanizadeh & Steven L. Puller, 2017. "Power to Choose? An Analysis of Consumer Inertia in the Residential Electricity Market," American Economic Journal: Economic Policy, vol 9(4), pages 192-226. citation courtesy of

 
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