Power to Choose? An Analysis of Consumer Inertia in the Residential Electricity Market

perc.tamu.edu 1 any states have opened retail electricity markets to competition so that households can choose their electricity provider. As a result, consumers have the ability to choose their retail provider at unregulated prices, creating new markets where entrant retailers procure wholesale energy and market that energy to consumers. Across the world, the retail electricity sector is being opened to competition -over onehalf of households in Europe have retail choice. In April 2016, the entire retail electricity market in Japan will be deregulated. Retail competition can lead to more competitive pricing and incentivize retailers to develop innovative new energy services. However, choice frictions can reduce the consumer gains of retail choice as the transition to competition occurs. Households that are given the ability to switch providers may not exercise the option to select an alternative lower priced energy retailer. For example, households may not actively acquire information about other energy retailers, or pay attention to offerings by other retailers, even if better options exist. Alternatively, even if households are aware of other options, they may value the brand name of the incumbent and this may reduce the