Journal Articles

Estimation of Search Frictions in the British Electricity Market

2014, forthcoming Journal of Industrial Economics

Matthijs Wildenbeest, Monica Giulietti, Michael Waterson

Abstract

This paper studies consumer search and pricing behavior in the British domestic electricity market following its opening to competition in 1999. We develop a sequential search model in which an incumbent and an entrant group compete for consumers who find it costly to obtain information on prices other than from their current supplier. We use a large data set on prices and input costs to structurally estimate the model. Our estimates indicate that consumer search costs must be relatively high in order to rationalize observed pricing patterns. We confront our estimates with observed switching behavior and find they match well.

Citation

Wildenbeest, Matthijs, Monica Giulietti and Michael Waterson (2014), "Estimation of Search Frictions in the British Electricity Market," Journal of Industrial Economics, forthcoming.

Kelley School of Business

Faculty & Research