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

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  • 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.

Suggested Citation

  • Katrina Jessoe & David Rapson, 2012. "Knowledge is (Less) Power: Experimental Evidence from Residential Energy Use," NBER Working Papers 18344, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:18344
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    References listed on IDEAS

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    1. Jacobsen, Grant D. & Kotchen, Matthew J. & Vandenbergh, Michael P., 2012. "The behavioral response to voluntary provision of an environmental public good: Evidence from residential electricity demand," European Economic Review, Elsevier, vol. 56(5), pages 946-960.
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    7. Allcott, Hunt, 2011. "Rethinking real-time electricity pricing," Resource and Energy Economics, Elsevier, vol. 33(4), pages 820-842.
    8. Severin Borenstein, 2002. "The Trouble With Electricity Markets: Understanding California's Restructuring Disaster," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 191-211, Winter.
    9. Allcott, Hunt, 2011. "Social norms and energy conservation," Journal of Public Economics, Elsevier, vol. 95(9), pages 1082-1095.
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    More about this item

    JEL classification:

    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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