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

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  • Takanori Ida
  • Wenjie Wang

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.

Suggested Citation

  • Takanori Ida & Wenjie Wang, 2014. "A Field Experiment on Dynamic Electricity Pricing in Los Alamos:Opt-in Versus Opt-out," Discussion papers e-14-010, Graduate School of Economics Project Center, Kyoto University.
  • Handle: RePEc:kue:dpaper:e-14-010
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    3. Takanori Ida & Naoya Motegi & Yoshiaki Ushifusa, 2016. "Behavioral Study of Personalized Automated Demand Response in Workplaces," Discussion papers e-16-010, Graduate School of Economics , Kyoto University.
    4. Takanori Ida & Kayo Murakami & Makoto Tanaka, 2015. "Electricity demand response in Japan:Experimental evidence from a residential photovoltaic generation system," Discussion papers e-15-006, Graduate School of Economics Project Center, Kyoto University.

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    More about this item

    Keywords

    Field Experiment; Behavioral Economics; Framing; Default Effect; Dynamic Elec- tricity Pricing.;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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