Assistance to electricity consumers with price misperception

Résumé

Electricity is consumed continuously night and day and is not storable at large scale. Consequently, in an electricity industry organized and managed efficiently, demand should be tightly responsive to time-varying prices. We explore the consequences of the limited ability of electricity consumers to use price signals in their decisions to withdraw energy from the grid and the advantages of an assistance service that can correct this bias. Depending on the statistical distribution of price misperception types, we determine the allocation of assistance that allows to decrease total consumption and the outcome of different market structures. Because of the impossibility of distinguishing between consumers who underestimate and those who overestimate electricity prices, we show that it may be suboptimal to organize a market for assistance. We also show that it is less efficient to rely on a private integrated monopoly than on two separate private monopolies, one for assistance, the other for energy.

Mots-clés

Demand response; electricity; energy saving; quasi rationality; consumers; screening; smart appliances; market design;

Codes JEL

C72: Noncooperative Games
D24: Production • Cost • Capital • Capital, Total Factor, and Multifactor Productivity • Capacity
D47: Market Design
L23: Organization of Production
L94: Electric Utilities