"Wild" tariff schemes: Evidence from the Republic of Georgia
The result's identifiers
Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216208%3A11230%2F22%3A10448846" target="_blank" >RIV/00216208:11230/22:10448846 - isvavai.cz</a>
Alternative codes found
RIV/00216208:11690/22:10448846
Result on the web
<a href="https://verso.is.cuni.cz/pub/verso.fpl?fname=obd_publikace_handle&handle=fe~f8o3_pB" target="_blank" >https://verso.is.cuni.cz/pub/verso.fpl?fname=obd_publikace_handle&handle=fe~f8o3_pB</a>
DOI - Digital Object Identifier
<a href="http://dx.doi.org/10.1016/j.eneco.2022.106030" target="_blank" >10.1016/j.eneco.2022.106030</a>
Alternative languages
Result language
angličtina
Original language name
"Wild" tariff schemes: Evidence from the Republic of Georgia
Original language description
Consumers often struggle to grasp complicated pricing plans, including increasing block rate (IBR) schemes, which have been used for decades by utilities in many parts of the world. The assumption that they encourage conservation has, however, recently been challenged (Ito, 2014). We take advantage of the unique IBR tariffs for electricity in the Republic of Georgia-where "overage" is penalized more heavily than in conventional IBRs-to ask whether consumers respond to price, and to which price specifically.Based on the data from several waves of the Georgia Household Budget Survey, we find evidence of "notches," namely missing probability mass on the right of the lowest block cutoff and a spike in the frequency of monthly consumption to the left of it. This is in contrast with the "bunching" pattern predicted by Borenstein (2009) when demand is not completely inelastic, and with the empirical evidence in Borenstein (2009) and Ito (2014).During our study period (2012-2019), the tariffs were revised-both downwards and upwards-to a different extent in different blocks and at different times across the regions of the country. We devise difference-indifference study designs that exploit such natural experiments, finding that consumption did increase when the tariffs were reduced and fell when they were raised. Ours is one of the few studies that exploits quasi experimental conditions to examine whether the response to price changes is symmetric. We find that it is, in that the implied price elasticity of electricity demand is in both cases 0.3.Finally, we fit an electricity demand function, which results in an even stronger price elasticity (-0.5). Households seem to respond to the actual, average price (here equal to the marginal price) rather than to expected price. Our estimates of the price elasticity bode well for a carbon tax, an energy tax, or simple tariff increases to help curb imports of gas-fired electricity from neighboring countries.
Czech name
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Czech description
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Classification
Type
J<sub>imp</sub> - Article in a specialist periodical, which is included in the Web of Science database
CEP classification
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OECD FORD branch
50201 - Economic Theory
Result continuities
Project
<a href="/en/project/GX19-26812X" target="_blank" >GX19-26812X: Frontiers in Energy Efficiency Economics and Modelling - FE3M</a><br>
Continuities
P - Projekt vyzkumu a vyvoje financovany z verejnych zdroju (s odkazem do CEP)
Others
Publication year
2022
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů
Data specific for result type
Name of the periodical
Energy Economics
ISSN
0140-9883
e-ISSN
1873-6181
Volume of the periodical
110
Issue of the periodical within the volume
June 2022
Country of publishing house
NL - THE KINGDOM OF THE NETHERLANDS
Number of pages
23
Pages from-to
106030
UT code for WoS article
000803795000004
EID of the result in the Scopus database
2-s2.0-85129381975