Does Energy Consumption Respond to Price Shocks? Evidence from a Regression-Discontinuity Design.

We exploit unique features of a recently introduced tariff schedule for natural gas in Buenos Aires to estimate the short-run impact of price shocks on residential energy utilization. The schedule induces a non-linear and non-monotonic relationship between households' accumulated consumption and unit prices, thus generating exogenous price variation, which we exploit in a regression-discontinuity design. We find that a price increase causes a prompt and significant decline in gas consumption. The results also indicate that consumers respond more to recent past bills than to expected prices, which argues against an assumption of perfect awareness of complex price schedules by consumers. [ABSTRACT FROM AUTHOR]