“Competing for Inattention: Price Discrimination in Residential Electricity Markets”
Jenya Kahn-Lang* (Stanford University)
This paper shows that residential customers pay very different prices for electricity in the same retail choice market, with low-income and other marginalized communities paying especially high prices. I explore the causes of these pricing patterns and find that suppliers charge high prices through in-person marketing and target marketing to low-income areas. Beyond its adverse distributional effects, I estimate that this marketing costs society two million dollars a year in the Baltimore region alone. However, policy implications are nuanced: while marketing restrictions can reduce average prices, they may also increase prices for customers who stay with retail choice suppliers. These price increases occur because marketing causes more frequent switching, and suppliers tend to increase prices at the time of contract renewal.