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A Measure of Switching Costs in the GB Electricity Retail Market

By Evens Salies

Abstract

In most liberalised electricity retail markets, incumbent firms still hold the majority of residential consumers. This situation focused the attention of regulatory institutions and energy economists on the determinants of consumers switching decisions. Fewer studies have, however, been devoted to measuring switching costs. In the present paper we calculate these costs in the Great Britain electricity retail market by revisiting the model suggested in Shy, O. (2002), A quick-and-easy method for estimating switching costs, International Journal of Industrial Organization, 20, pp. 71–87. The average net cost of switching regional incumbents is €385 while the net cost of switching back to them is negative for customers on standard credit or direct debit plans but positive for prepayment customers.

Topics: D83 - Search; Learning; Information and Knowledge; Communication; Belief, L94 - Electric Utilities, D43 - Oligopoly and Other Forms of Market Imperfection
Year: 2005
DOI identifier: 10.1080/00036840600794322
OAI identifier: oai:mpra.ub.uni-muenchen.de:28255

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