Research Insights: Does Energy Consumption Respond to Price Shocks?

Accesible PDF image
Apr 2023
Using unique features of a tariff schedule for natural gas in Buenos Aires, we find that a price increase causes a prompt and significant decline in residential consumption. The results also indicate that consumers respond more to past bills-actual cost paid-than to expected prices. Policymakers and regulators need to move beyond the assumption of perfect awareness of complex price schedules by consumers.