Rockets and feathers: asymmetric pricing and consumer search - evidence from electricity retailing

Heim, Sven

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URN: urn:nbn:de:bsz:180-madoc-415566
Document Type: Working paper
Year of publication: 2016
The title of a journal, publication series: ZEW Discussion Papers
Volume: 16-070
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: D83 , L11,
Keywords (English): Information , cost pass-through , consumer search , rockets and feathers
Abstract: Recent theories aim at explaining asymmetric cost pass-through by different consumer search efforts depending on whether prices increase or decrease. This paper investigates the relation between price adjustments and consumer search intensity for the German electricity retail market utilizing a unique panel dataset comprising retail electricity prices and consumer search queries on price-comparison websites. The main findings are 1) consumers search less when prices fall than when they rise, 2) costs are passed-through asymmetrically and 3) controlling for search intensity particularly eliminates the asymmetry. This suggests that ‘Rockets and Feathers’ patterns may be explained by an omitted variable bias.

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