Price Elasticity and Beyond: A Three-Dimensional Analysis of the Residential Electricity Market in New York

37 Pages Posted: 3 Jun 2021 Last revised: 15 Mar 2022

See all articles by Etienne Billette de Villemeur

Etienne Billette de Villemeur

CNRS - Lille Economics & Managment - UMR 9221; Lille University

Pierre-Olivier Pineau

HEC Montreal - Department of Decision Sciences

Nima Rafizadeh

HEC Montreal

Date Written: June 2, 2021

Abstract

We construct a three-dimensional panel dataset (utility × county × year) from 21 electric utilities in all 62 counties of New York's residential electricity market over a 20-year period to estimate the price elasticity of residential electricity demand and to examine how the price elasticity varies in different contexts, as described by time periods, price levels, income levels, weather indicators, and other variables. Such data enables us to account for variation within a large jurisdiction without relying on difficult-to-acquire household-level data, particularly for different years. Our results show that the short-run and long-run price elasticity of demand are respectively in the vicinity of -0.04 and -0.60. Our findings also indicate that there is heterogeneity across contexts, and once this heterogeneity is taken into account, the multiplicity of significant price elasticities makes it difficult to obtain a valid, global interpretation of the impact of a price change on consumer behavior. Given the heterogeneity of price elasticities across contexts, caution should be exercised when using them for policy purposes, as a single value may not represent any consumer.

Keywords: Electricity Demand, Price Elasticity, Panel Data Estimation, New York

JEL Classification: C23, L52, Q41, Q58

Suggested Citation

Billette de Villemeur, Etienne and Billette de Villemeur, Etienne and Pineau, Pierre-Olivier and Rafizadeh, Nima, Price Elasticity and Beyond: A Three-Dimensional Analysis of the Residential Electricity Market in New York (June 2, 2021). Available at SSRN: https://ssrn.com/abstract=3858877 or http://dx.doi.org/10.2139/ssrn.3858877

Etienne Billette de Villemeur

CNRS - Lille Economics & Managment - UMR 9221 ( email )

Lille
France

Lille University ( email )

Lille
France

Pierre-Olivier Pineau (Contact Author)

HEC Montreal - Department of Decision Sciences ( email )

3000 Côte-Sainte-Catherine Road
Montreal, QC H2S1L4
Canada

Nima Rafizadeh

HEC Montreal ( email )

3000, Chemin de la Côte-Sainte-Catherine
Montreal, Quebec H2X 2L3
Canada

HOME PAGE: http://www.nimarafizadeh.com/

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