Jessoe, Katrina and Rapson, David “Knowledge is (Less) Power: Experimental Evidence from Residential Energy Use” (April 2013) (Revised version published in the American Economic Review, 104(4): 1417-1438, April 2014) | WP-241R | Blog Post
Imperfect information about product attributes inhibits efficiency in many choice settings, but can be overcome by providing simple, low-cost information. Using a field experiment, we 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, providing evidence of habit formation, spillovers, and greenhouse gas abatement. Survey evidence points to learning as a likely mechanism for the treatment differential.