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"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 &quot;overage&quot; 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 &quot;notches,&quot; 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 &quot;bunching&quot; 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

  • Czech description

Classification

  • Type

    J<sub>imp</sub> - Article in a specialist periodical, which is included in the Web of Science database

  • CEP classification

  • 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