One fundamental question of economics is how consumers respond to price variation in the long run, with applications across a variety of fields. But there is a dearth of causally-identified long-run elasticity estimates, due to challenging empirical conditions. In this paper, I leverage a novel source of exogenous and persistent price variation to estimate the long-run price elasticity of demand in the setting of residential electricity. In this setting, I find that consumers are sixteen times as responsive to prices in the long run compared to the short-run, with elasticity estimates of -2.25 and -0.14 respectively. I explore mechanisms and find that in the long run, consumers respond differently to temperature across price regimes, with these differences accounting for 34% of the observed consumption differences. These findings highlight the potential impacts of price-based policies on demand and emphasize the importance of setting prices to reflect social marginal costs.
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