A Field Experiment on Dynamic Electricity Pricing in Los Alamos:Opt-in Versus Opt-out

Takanori Ida and Wenjie Wang

Discussion papers from Graduate School of Economics Project Center, Kyoto University

Abstract: We use a field experiment to examine how consumers respond to distinct combinations of default options (opt-in versus opt-out) and framing of economic incentives (gain versus loss). A randomized controlled trial (RCT) is implemented to investigate the demand reduction performance of three dynamic electricity pricing programs - opt-in critical peak pricing (CPP, incentive framed as loss), opt-out CPP, and opt-out peak time rebate (PTR, incentive framed as gain). We find that the opt-in customer enrollment rate is much higher than those documented in the literature are; our subjects’ high education levels and technology related experiences may have contributed largely to the mitigation of the opt-in default effect. In addition, we obtain precise estimates of the average treatment effects, with the treatment effect being most pronounced for customers assigned to the opt-in CPP group. This result is largely attributable to the high opt-in CPP enrollment rate and to the customer inertia generated by opt-out procedures. Furthermore, an “option to quit” effect is found among PTR customers. This finding is consistent with a growing behavioral literature highlighting that incentives framed as losses loom larger than those framed as gains.

Keywords: Field Experiment; Behavioral Economics; Framing; Default Effect; Dynamic Elec- tricity Pricing. (search for similar items in EconPapers)
JEL-codes: C23 C93 D03 Q41 (search for similar items in EconPapers)
Date: 2014-09
New Economics Papers: this item is included in nep-ene, nep-exp and nep-reg
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:kue:dpaper:e-14-010

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