Review of Economic Studies Vol. 88 No. 6 2021
Default Effects And Follow-On Behaviour: Evidence From An Electricity Pricing Program
Abstract
We study default effects in the context of a residential electricity-pricing program. In the large-scale randomized controlled trial we analyse, one treatment group was given the option to opt-in to time-varying pricing while another was defaulted into the program but allowed to opt-out. We provide dramatic evidence of a default effect on program participation, consistent with previous research. A novel feature of our study is that we also observe how the default manipulation impacts customers’ subsequent electricity consumption. Passive consumers who did not opt-out but would not have opted in—comprising more than 70% of the sample—nonetheless reduce consumption in response to higher prices. Observing of this follow-on behaviour enables us to assess competing explanations for the default effect. We draw conclusions about the likely welfare effects of defaulting customers onto time-varying pricing.
- DOI
- 10.1093/restud/rdab018
- Volume
- 88
- Issue
- 6
- Pages
- 2886-2934
- Language
- en
- Sources
- openalex bibtex:phds-export.bib crossref