Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/174276 
Year of Publication: 
2016
Series/Report no.: 
ESRI Working Paper No. 543
Publisher: 
The Economic and Social Research Institute (ESRI), Dublin
Abstract: 
Two laboratory studies investigated the effect of price transparency on consumers' decision-making in the residential electricity market. The first tested whether consumers have difficulties when confronted with unit prices expressed as discounts from standard rates, which vary between suppliers. Results showed that consumers were much more likely to choose packages with low unit prices when unit prices were presented explicitly rather than as discounts. When discounts were described as percentages, consumers' decisions were also less accurate. The second study pre-tested the likely impact of a potential mandatory "estimated annual bill" (EAB) on marketing material, calculated for a customer with average usage. Results demonstrated that consumers were more likely to judge value according to unit prices when an EAB appeared on advertisements. Moreover, when unit prices were communicated via an EAB rather than a discount, consumers chose lower unit price offerings and were more precise in their decision-making. The findings suggest that the EAB is likely to be beneficial for consumers' decision-making.
Subjects: 
energy
price transparency
estimated annual bill
mandated simplification
consumer protection
JEL: 
C91
D18
Q41
Document Type: 
Working Paper

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