Loss Aversion and Time-Differentiated Electricity Pricing
- Lawrence Berkeley National Lab. (LBNL), Berkeley, CA (United States)
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.
- Research Organization:
- Lawrence Berkeley National Lab. (LBNL), Berkeley, CA (United States)
- Sponsoring Organization:
- USDOE
- DOE Contract Number:
- AC02-05CH11231
- OSTI ID:
- 1248927
- Report Number(s):
- LBNL-182764; ir:182764
- Country of Publication:
- United States
- Language:
- English
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