Loss Aversion and Time-Differentiated Electricity Pricing
I develop a model of loss aversion over electricity expenditure, from which I derive testable predictions for household electricity consumption while on combination time-of-use (TOU) and critical peak pricing (CPP) plans. Testing these predictions results in evidence consistent with loss aversion: (1) spillover effects - positive expenditure shocks resulted in significantly more peak consumption reduction for several weeks thereafter; and (2) clustering - disproportionate probability of consuming such that expenditure would be equal between the TOUCPP or standard flat-rate pricing structures. This behavior is inconsistent with a purely neoclassical utility model, and has important implications for application of time-differentiated electricity pricing.
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- Resource Type:
- Technical Report
- Research Org:
- Lawrence Berkeley National Laboratory (LBNL), Berkeley, CA (United States)
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- Country of Publication:
- United States
- 29 ENERGY PLANNING, POLICY, AND ECONOMY
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