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Knowledge Is (Less) Power: Experimental Evidence from Residential Energy Use

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  • Katrina Jessoe
  • David Rapson

Abstract

Imperfect information about product attributes inhibits efficiency in many choice settings, but can be overcome by providing simple, lowcost information. We use a randomized control trial to test the effect of high-frequency information about residential electricity usage on the price elasticity of demand. Informed households are three standard deviations more responsive to temporary price increases, an effect that is not attributable to price salience. Conservation extends beyond pricing events in the short and medium run, providing evidence of habit formation and implying that the intervention leads to greenhouse gas abatement. Survey evidence suggests that information facilitates learning.

Suggested Citation

  • Katrina Jessoe & David Rapson, 2014. "Knowledge Is (Less) Power: Experimental Evidence from Residential Energy Use," American Economic Review, American Economic Association, vol. 104(4), pages 1417-1438, April.
  • Handle: RePEc:aea:aecrev:v:104:y:2014:i:4:p:1417-38
    Note: DOI: 10.1257/aer.104.4.1417
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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