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Selection on Welfare Gains: Experimental Evidence from Electricity Plan Choice

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  • ITO Koichiro
  • IDA Takanori
  • TANAKA Makoto

Abstract

We study a problem in which policymakers need to screen self-selected individuals based on their unobserved heterogeneity in the social welfare gains resulting from a policy intervention. In our framework, the marginal treatment effects and marginal treatment responses arise as key statistics that allow for the characterization of social welfare. We apply this framework to a randomized field experiment on electricity plan choice. Consumers were offered socially efficient dynamic pricing with randomly assigned take-up incentives. We find that price-elastic consumers—who generate larger welfare gains—are more likely to self-select. Our counterfactual simulations quantify the optimal take-up incentives that exploit observed and unobserved heterogeneity in selection and welfare gains.

Suggested Citation

  • ITO Koichiro & IDA Takanori & TANAKA Makoto, 2021. "Selection on Welfare Gains: Experimental Evidence from Electricity Plan Choice," Discussion papers 21008, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:21008
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    Cited by:

    1. Luis E. GONZALES & ITO Koichiro & Mar REGUANT, 2022. "The Dynamic Impact of Market Integration: Evidence from renewable energy expansion in Chile," Discussion papers 22050, Research Institute of Economy, Trade and Industry (RIETI).
    2. Capitán, Tabaré & Alpízar, Francisco & Madrigal-Ballestero, Róger & Pattanayak, Subhrendu K., 2021. "Time-varying pricing may increase total electricity consumption: Evidence from Costa Rica," Resource and Energy Economics, Elsevier, vol. 66(C).
    3. Nakai, Miwa & von Loessl, Victor & Wetzel, Heike, 2024. "Preferences for dynamic electricity tariffs: A comparison of households in Germany and Japan," Ecological Economics, Elsevier, vol. 223(C).
    4. Christina Gravert, 2024. "From Intent to Inertia: Experimental Evidence from the Retail Electricity Market," CESifo Working Paper Series 11139, CESifo.
    5. Hirofumi Kurokawa & Shusaku Sasaki, 2023. "How Does Opt-in Work? A Field Experiment on Financial Incentives for Physical Activity," Discussion Papers in Economics and Business 23-01, Osaka University, Graduate School of Economics.
    6. Lang, Corey & Qiu, Yueming (Lucy) & Dong, Luran, 2023. "Increasing voluntary enrollment in time-of-use electricity rates: Findings from a survey experiment," Energy Policy, Elsevier, vol. 173(C).
    7. Pébereau, Charles & Remmy, Kevin, 2023. "Barriers to real-time electricity pricing: Evidence from New Zealand," International Journal of Industrial Organization, Elsevier, vol. 89(C).
    8. Luther Yap, 2022. "Sensitivity of Policy Relevant Treatment Parameters to Violations of Monotonicity," Working Papers 655, Princeton University, Department of Economics, Industrial Relations Section..
    9. Takanori Ida & Takunori Ishihara & Koichiro Ito & Daido Kido & Toru Kitagawa & Shosei Sakaguchi & Shusaku Sasaki, 2021. "Paternalism, Autonomy, or Both? Experimental Evidence from Energy Saving Programs," Papers 2112.09850, arXiv.org.

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    More about this item

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • 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
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy

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