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Why Do More British Consumers Not Switch Energy Suppliers? The Role of Individual Attitudes

Author

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  • Xiaoping He

    (Collaborative Innovation Center for Energy Economics and Energy Policy, School of Economics, Xiamen University)

  • David Reiner

    (Energy Policy Research Group, Judge Business School, University of Cambridge)

Abstract
Consumers’ activities play an important role in determining the extent to which any market may become competitive. Although energy prices and switching tariffs and suppliers become very salient politically over 2013-14 in the UK and the number and share of small suppliers increased dramatically over that period, relatively fewer customers switched suppliers in UK electricity and gas markets despite the potential for financial gains, suggesting that non-price factors may affect switching decisions. Using a unique nation-wide British survey, we investigate the determinants of consumers’ switching behavior in electricity and gas markets, by emphasizing the effects of individual attitudes towards energy issues as well as perception of switching cost and benefit. We find that the complexity of household energy tariffs, consumers’ lack of attention to issue of energy prices, expectation on the costs of switching process and lack of switching experience discourage switching. Political allegiance also appears to play a role as Labour Party voters are more likely to switch. Few demographic factors are found to affect the likelihood of switching. Higher education qualifications are related to increased activity in energy markets. Households paying by direct debit are more likely to switch than those paying by other ways. Financial hardship a household suffers does not matter for switching decisions, suggesting there is no clear relationship between switching and income. We conclude that policies which emphasize simplification of energy tariffs, increasing convenience of switching, improving consumers’ concerns about energy issues, improving consumers’ confidence to exercise switch are likely to increase consumer activity.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Xiaoping He & David Reiner, 2015. "Why Do More British Consumers Not Switch Energy Suppliers? The Role of Individual Attitudes," Working Papers EPRG 1515, Energy Policy Research Group, Cambridge Judge Business School, University of Cambridge.
    • Handle: RePEc:enp:wpaper:eprg1515
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    Cited by:

    1. Duso, Tomaso & Szücs, Florian, 2017. "Market power and heterogeneous pass-through in German electricity retail," European Economic Review, Elsevier, vol. 98(C), pages 354-372.
    2. Fontana, Magda & Iori, Martina & Nava, Consuelo Rubina, 2019. "Switching behavior in the Italian electricity retail market: Logistic and mixed effect Bayesian estimations of consumer choice," Energy Policy, Elsevier, vol. 129(C), pages 339-351.
    3. Itaoka, Kenshi & Chapman, Andrew & Farabi-Asl, Hadi, 2022. "Underpinnings of consumer preferences and participation in Japan's liberalized energy market," Utilities Policy, Elsevier, vol. 76(C).
    4. Fontana, Magda & Iori, Martina & Nava, Consuelo Rubina, 2017. "Switching Behavior and the Liberalization of the Italian Electricity Retail Market. Logistic and Mixed Effect Bayesian Estimations of Consumer Choice," Department of Economics and Statistics Cognetti de Martiis. Working Papers 201721, University of Turin.

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    More about this item

    Keywords

    Energy markets; switching supplier; household behaviors; logit model;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • Q49 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Other
    • R29 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Other

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