Giulietti, Monica, Waddams, Catherine and Waterson, Michael, 1950- (2000) Redundant regulation? : competition and consumer choice in the residential energy markets. [Report]

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Abstract

The UK energy regulator has recently removed price controls from about 40% of residential energy users, and plans total deregulation of the gas and electricity markets by 2002, relying instead on general competition policy to protect consumers. We examine responses to a specially commissioned survey of over one thousand consumers, to identify determinants of consumer choice between suppliers. We conclude that there are substantial switching costs which seem higher for more vulnerable groups. By assessing the savings which consumers require to switch supplier, we deduce that the incumbent retains considerable market power, suggesting that some continued regulation may be necessary.

Item Type:	Report
Subjects:	H Social Sciences > HC Economic History and Conditions
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	Gas industry -- Deregulation -- Great Britain, Competition -- Great Britain, Public utilities -- Deregulation -- Great Britain, Consumer behavior
Series Name:	Research paper series (Warwick Business School Centre for Management under Regulation)
Publisher:	Warwick Business School, Centre for Management under Regulation
Place of Publication:	Coventry
ISBN:	1369-0450
Date:	November 2000
Number:	No.00/04
Number of Pages:	26
Status:	Not Peer Reviewed
Access rights to Published version:	Open Access
Funder:	Leverhulme Trust (LT)
Grant number:	F215/AX
References:	Bawa, K., 1990, Modeling Inertia and Variety Seeking Tendencies in Brand Choice Behavior, Marketing Science, 9,263-278. Bennett, M., D. Cooke and C. Waddams Price, 2000, Left out in the Cold?, Centre for Management under Regulation Research paper 00/3, September. Calem, P and L. Mester, 1995, Consumer Behavior and the Stickiness of Credit-Card Interest Rates, American Economic Review, 85, 1327-1336. Farrell, J and C Shapiro, 1988, Dynamic competition with switching costs, Rand Journal of Economics, 19, 1, pp 123-137. Gilboa, I. and Pazgal, A.I., 1995, History Dependent Brand Switching: Theory and Evidence, Northwestern University Center for Mathematical Studies in Economics and Management Science, Discussion Paper 1146. Green, R., 2000, Can Competition replace Regulation for Small Utility Customers?, mimeo, August. Klemperer, P., 1989, Price wars caused by switching costs, Review of Economic Studies, 56,405-420. Klemperer, P., 1995, Competition when Consumers have switching costs: an overview with applications to industrial organisation, macroeconomics and international trade, Review of Economic Studies, 62, 513-539. Knittel, C., 1997, Interstate Long distance Rates: Search Costs, Switching Costs, and Market Power, Review of Industrial Organization, 12, 519-536. Ofgem, 2000(a), Gas and Electricity Supply Licences: Proposals for Standard Nondiscrimination Licence Conditions. Ofgem, 2000 (b), Electricity and Gas Competition Review: Research Study conducted for Ofgem, January. Oftel, 2000, Consumer switching behaviour in the telecoms market, web www.oftel.gov.uk/cmu/research/swit08000.htm September 2000. Parmar, M., C. Waddams Price and M. Waterson, 2000, Exercising Consumer choice, Switching gas suppliers in the UK residential market, Centre for Management under Regulation Research paper 00/1, March. Purushottam, P. and Krishnamurthi, L., 1992, A Probit Model of Choice Dynamics, Marketing Science, 11, 189-206. Rothschild, M., 1974, Searching for the Lowest Price when the Distribution of Prices is Unknown, Journal of Political Economy, 82, 689-712. Utilities Act, 2000, HMSO, London.
URI:	http://wrap.warwick.ac.uk/id/eprint/22

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