Selection on Welfare Gains: Experimental Evidence from Electricity Plan Choice
American Economic Review
vol. 113,
no. 11, November 2023
(pp. 2937-73)
Abstract
We study a problem in which policymakers need to screen self-selected individuals by unobserved heterogeneity in social welfare gains from a policy intervention. In our framework, the marginal treatment effects and marginal treatment responses arise as key statistics to characterize social welfare. We apply this framework to a randomized field experiment on electricity plan choice. Consumers were offered welfare-improving 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.Citation
Ito, Koichiro, Takanori Ida, and Makoto Tanaka. 2023. "Selection on Welfare Gains: Experimental Evidence from Electricity Plan Choice." American Economic Review, 113 (11): 2937-73. DOI: 10.1257/aer.20210150Additional Materials
JEL Classification
- C93 Field Experiments
- D12 Consumer Economics: Empirical Analysis
- L11 Production, Pricing, and Market Structure; Size Distribution of Firms
- L94 Electric Utilities
- L98 Industry Studies: Utilities and Transportation: Government Policy