Working Paper: NBER ID: w18344
Authors: Katrina Jessoe; David Rapson
Abstract: This paper presents experimental evidence that information feedback dramatically increases the price elasticity of demand in a setting where signals about quantity consumed are traditionally coarse and infrequent. In a randomized controlled trial, residential electricity customers are exposed to price increases, with some households also receiving displays that transmit high-frequency information about usage and prices. This substantially lowers information acquisition costs and allows us to identify the marginal information effect. Households only experiencing price increases reduce demand by 0 to 7 percent whereas those also exposed to information feedback exhibit a usage reduction of 8 to 22 percent, depending on the amount of advance notice. The differential response across treatments is significant and robust to the awareness of price changes. Conservation extends beyond the treatment window, providing evidence of habit formation, spillovers, and greenhouse gas abatement. Results suggest that information about the quantity consumed facilitates learning, which likely drives the treatment differential.
Keywords: information feedback; price elasticity of demand; residential electricity consumption; randomized controlled trial; energy conservation
JEL Codes: L94
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Incomplete information (D82) | Efficiency losses in energy consumption (Q41) |
| Interventions providing information (D83) | More efficient consumer choices (D11) |
| Information feedback (D83) | Price elasticity of demand (D12) |
| Price increases + Information feedback (D89) | Reduction in usage (H23) |
| Price increases (E30) | Reduction in usage (H23) |
| Information feedback (D83) | Consumer responsiveness to price changes (D11) |