Laura Grant, Claremont McKenna College

Nonlinearities in pricing should induce a response to said change in marginal price. Literature finds such a response when (1) employees fabricate self-reported income, or (2) there are fixed and discrete needs or incentives such as designing automobiles or refinancing a home. An optimal response has yet to be detected with marginal pricing for a continuously consumed good such as electricity; indeed, the literature finds an average price response. We use a natural experiment of within-household residential electricity consumption, with and without nonlinear pricing. We find evidence of marginal price responses as shown with bunching at the nonlinearity. We also include the possibility of satiation aka, a bliss point, and measure its effect. Our estimated price elasticities fall within the range found by past literature short-run changes in price. The policy implication is that with a clear nonlinearity and sufficient information about consumption, consumers can respond to marginal price.