Acentral prediction of economic theory is that consumers adjust their consumption to the marginal price. However, in energy markets, recent evidence suggests that households often respond to the average price reflected in the bill. This paper exploits a natural experiment generated by the 2024 subsidy reform in Argentina, which replaced the fullsubsidy scheme for low-income households with an increasing block pricing (IBP) system, subsidizing up to 350 kWh/month and applying the full price to the excess.
Using administrative billing data, a combined difference-in-differences and regression discontinuity design, with household fixed effects and climate controls, we find that households reduce their demand by approximately 15% (62 kWh) in response to a 100% increase in the marginal price. However, this effect weakens and loses significance near the threshold, suggesting that users do not react to the marginal price but rather to the average price, in line with the literature on price perception and salience. Additionally, a tripledifferences model is implemented exploiting variation in average costs due to the Social Electricity Tariff, with no significant heterogeneous effects found between beneficiaries and non-beneficiaries. Robustness analyses and falsification exercises further reinforce the causal validity of the results.
Taken together, these findings provide quasi-experimental evidence on consumer responses to complex pricing structures and show the limitations of IBP as a conservation tool, with relevant implications for the design of subsidies and price signals.
Keywords: Electricity pricing; marginal and average price response; increasing block pricing; residential energy demand; subsidy reform; difference-in-differences; regression discontinuity design; heterogeneous effects.
JEL Codes: C21; C23; D12; H31; Q41; Q48.
Autores: Facundo Ale y Elías Emanuel Tapie
Director: Alejandro Martín Danón
