Default Effects And Follow-On Behaviour: Evidence From An Electricity Pricing Program

The Impact of Presumed Consent Legislation on Cadaveric Oorgan Donation: A Cross-country Study”

Meredith Fowlie, Catherine Wolfram, Patrick Baylis, C Anna Spurlock, Annika Todd-Blick and Peter Cappers

The Review of Economic Studies, 2021, vol. 88, issue 6, 2886-2934

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.

Keywords: Default choice; Electricity markets; Rate design; D90; Q41; D80 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (22)

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Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:88:y:2021:i:6:p:2886-2934.

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