Nonlinear pricing and tariff differentiation: Evidence from the British electricity market

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Abstract

Liberalisation of the British household electricity market, in which previously monopolised regional markets were exposed to large-scale entry, is used as a natural experiment on oligopolistic nonlinear pricing. Each oligopolist offered a single two-part electricity tariff, but inconsistent with current theory, the two-part tariffs were heterogeneous in ways that cannot be attributed to explanations such as asymmetric costs or variations in brand loyalty. Instead, the evidence suggests that firms deliberately differentiated their tariff structures, resulting in market segmentation according to consumers' usage.
Original languageEnglish
Pages (from-to)57-77
Number of pages21
JournalThe Energy Journal
Volume35
Issue number1
Publication statusPublished - 2014

Keywords

  • Price discrimination, Two-part tariffs, Segmentation, Oligopoly, Electricity,

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