Journal
OXFORD ECONOMIC PAPERS-NEW SERIES
Volume 62, Issue 4, Pages 647-668Publisher
OXFORD UNIV PRESS
DOI: 10.1093/oep/gpq006
Keywords
L00; D83
Categories
Funding
- ESRC [ES/E001661/1, ES/H004831/1] Funding Source: UKRI
- Economic and Social Research Council [ES/H004831/1, ES/E001661/1] Funding Source: researchfish
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This paper demonstrates that the ability of consumers to choose the best alternative supplier is limited even in a relatively simple and transparent market. Across two independent datasets from the UK electricity market we find, on aggregate, that those consumers switching exclusively for price reasons appropriated less than a half of the gains available. While such outcomes can be explained by high search costs, the observation that at least 17% of consumers actually reduced their surplus as a result of switching cannot. We rule out an explanation of incorrect demand prediction, and test for others including mis-selling.
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