Data and Code for: Misunderstanding nonlinear prices: Evidence from a natural experiment on residential electricity demand

Resource Type
Dataset : administrative records data, program source code
  • Shaffer, Blake (University of Calgary)
Publication Date
Free Keywords
Electricity demand; nonlinear prices; misperception; heterogeneity
  • Abstract

    This paper examines how consumers respond to nonlinear prices. Exploiting a natural experiment with electricity consumers in British Columbia, I find evidence that some households severely misunderstand nonlinear prices---incorrectly perceiving that the marginal price applies to all consumption, not simply the last unit. While small in number, the exaggerated responses by these households have a large effect in aggregate, masking an otherwise predominant response to average price. Previously largely unexplored in the literature, this type of misunderstanding has important economic, policy and methodological implications beyond electricity markets. I estimate the welfare loss for these households to be the equivalent of 10% of annual electricity expenditure.
Temporal Coverage
  • 2005-01-01 / 2013-12-31
    Time Period: Sat Jan 01 00:00:00 EST 2005--Tue Dec 31 00:00:00 EST 2013
  • 2005-01-01 / 2013-12-31
    Collection Date(s): Sat Jan 01 00:00:00 EST 2005--Tue Dec 31 00:00:00 EST 2013
Geographic Coverage
  • British Columbia
Sampled Universe
All residential electricity accounts (households) in the City of New Westminster and the surrounding 3-digit postal codes served by BC Hydro.
  • Has version
    DOI: 10.3886/E111481V1
  • Shaffer, Blake. “Misunderstanding Nonlinear Prices: Evidence from a Natural Experiment on Residential Electricity Demand.” American Economic Journal: Economic Policy, n.d.

Update Metadata: 2020-07-23 | Issue Number: 1 | Registration Date: 2020-07-23