Barriers to Switching Energy Suppliers
Wed, 19 Oct 2016 15:30:00 BST
Quantitative Analysis of Business, Economics and Finance (QABEF) Research Group Seminar
Speaker: Prof. Monica Giulietti – Loughborough University
Wed, 26 Oct 2016, 12:30, Boardroom
All staff and students welcome
Barriers to Switching Energy Suppliers: Why Monetary Savings are not enough?
Liberalised retail energy markets present an apparent contradiction: there are concerns about affordability as energy prices rise, but at the same time many consumers, including those who are struggling to pay their bills, appear to leave ‘money on the table’. We use the decisions made by nearly 110,000 consumers in a collective switching exercise to identify switching barriers amongst a particularly active group of consumers. The decision whether or not to accept an offer can be viewed as a pure switching choice, since participants had already undertaken the equivalent of ‘search’ activity by providing their energy consumption details to the auction. For around 10,000 consumers we have additional survey data regarding their preferences and the precise context of their switching decision. Our main result is that observed consumer behaviour is still largely consistent with a rational choice framework if a sufficiently rich range of non-monetary factors are considered, although, we do not rule out behavioural explanations. The apparent contradiction outlined in the first sentence is explained, at least in the current dataset, by recorded monetary savings translating into much smaller increases in expected utility once switching costs are considered.
