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 -2.24 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 percent 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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