Switching Costs in Netherlands Energy Markets: Can Liberalisation Bring Benefits to Small Customers? |
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Authors: | Marc Pomp Victoria Shestalova |
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Institution: | (1) The Netherlands Bureau for Economic Policy Analysis (CPB), P. O. Box 80510, The Hague, 2508 GM, The Netherlands |
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Abstract: | Summary We use data from a consumer survey to uncover factors deterring consumer switching in liberalised residential energy markets
in The Netherlands. We find that actual or perceived switching costs represent an important barrier for switching energy suppliers.
This enables incumbent firms to charge higher markups than entrants. We analyse the welfare consequences of switching costs
in two scenarios, a pessimistic one in which switching costs remain at the level measured in the survey and an optimistic
one in which they decline enough for the market to reach a competitive equilibrium level. The paper concludes with a discussion
of policy options for reducing switching costs.
We are grateful to the Dutch Consumer Union for providing the data for this analysis. We also would like to thank two anonymous
referees and the editor for their comments and helpful suggestions. |
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Keywords: | consumer choice energy switching cost competition policy |
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