Andrea Langer-Ballion

Article "Why "Energy Price Brakes" Encourage Moral Hazard, Raise Energy Prices, and Reinforce Energy Savings " accepted for publication in the RAND Journal of Economics

In order to support households and businesses in the face of skyrocketing energy costs following the Russian invasion of Ukraine, the German government has introduced the so-called "energy price brakes". The special feature of this relief measure is that it provides for a lump-sum payment, which increases in the contractually fixed energy price per unit of energy. In a formal model, Markus Dertwinkel-Kalt from the University of Münster and Christian Wey from the HHU Düsseldorf show that this measure creates false incentives on the part of the energy suppliers to increase the energy prices. On the one hand, this increases the costs of this measure, but on the other hand, it also increases energy savings. Whether the beneficiaries of this measure are the consumers or the companies depends on the structure of the market. The article, first circulated in Decemeber 2022, was accepted for publication prestigious RAND Journal of Economics in September 2023.