Customer switching, firm entry and regulatory policy: Evidence from retail electricity market restructuring

Abstract

Customer switching and firm entry are central to market performance, yet the linkages between these market characteristics has not been empirically examined. This study seeks to rectify this lacuna by examining the customer switching-firm entry relationship using direct observations on both. We do so in the context of the Maryland retail electricity industry, which began to allow both entry and customer switching in the late 1990s. Our empirical analysis provides support for the interplay between these market characteristics, as well as the important role that legislative and regulatory market design mechanisms have on both consumer switching and entry.