Non-Sequential Search, Competition and Price Dispersion in Retail Electricity
in: Lectures "WIFO-Extern"
Vortragsreihe "WIFO-Extern", Österreichisches Institut für Wirtschaftsforschung, Wien, 21.09.2016
Online seit: 04.08.2016 0:00
In order to investigate the impact of consumer search and competition on pricing strategies in Germany's electricity retail,
we utilise 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, 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.
Forschungsbereich:Makroökonomie und öffentliche Finanzen