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Discussion Paper Details

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Title: Market Liberalization: Price Dispersion, Price Discrimination and Consumer Search in the German Electricity Markets

Author(s): Klaus Gugler, Sven Heim, Maarten Janssen and Mario Liebensteiner

Publication Date: September 2018

Keyword(s): electricity, price discrimination, price dispersion and search

Programme Area(s): Industrial Organization

Abstract: We study how consumer search affects pricing in markets with incumbents and entrants using panel data on German electricity retail markets. Consumers observe the baseline price of the incumbent and decide whether or not to search. Incumbent providers can price discriminate between searching and loyal consumers. Empirically we show that local incumbents increase their baseline rate while entrants decrease their tariffs if consumer search increases. Moreover, the incumbent price discriminates more strongly in markets with more consumer search. Using a theoretical model, we show that these pricing patterns are consistent with the strategic interaction of profit-maximizing firms.

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Bibliographic Reference

Gugler, K, Heim, S, Janssen, M and Liebensteiner, M. 2018. 'Market Liberalization: Price Dispersion, Price Discrimination and Consumer Search in the German Electricity Markets'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=13197