Primary Outcomes (explanation)

For the pass-through rate of an energy price shock, we directly ask survey participants (firm managers) about it in the survey. We are using a slider from -100% to +100%. For each respondent, we are planning to take the data as is from those questions.

Our goal is to estimate the average pass-through for each firm and their beliefs about the pass-through in the rest of the economy. To compute the bias in beliefs about the pass-through, we will compare the average of the firms' specific pass-through for the whole sample, i.e., E[p_i], with the average of the firm-specific beliefs of the pass-through rate for the whole economy E[p].

For the value of loss load (VOLL), we are asking three questions to construct this variable. First, we have a value of loss load that corresponds to a willingness to pay to avoid a temporary cut in electricity. We specifically asked for the percentage increase in their current energy price that firms will be willing to pay to avoid such a cut. Using information about the electricity price a firm currently play, we can then compute the marginal WTP: percentage increase X current electricity price. This is our first WTP estimate of the VOLL. We call it the short-term VOLL

The second and third questions we ask allow us to compute a risk premium on medium/long-term energy contracts, which is our second measure of VOLL. For this measure, we divide the marginal WTP: which is the percentage increase respondents declare X current electricity price divided by the change in risk to avoid a power cut. Note the vary the change in risk, we are thus planning to estimate a quadratic function to match the VOLL calculated between the VOLL obtained for each change in risk to account for risk aversion.