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Information Provision and Consumer Behavior: A Natural Experiment in Billing Frequency

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  • Wichman, Casey J.

    (Resources for the Future)

Abstract

In this study, I examine a causal effect of billing frequency on consumer behavior. I exploit a natural experiment in which residential water customers transitioned exogenously from bi-monthly to monthly billing. I find that customers increase consumption by approximately 5 percent in response to more frequent information. This result is reconciled in a model of price uncertainty, where increases in billing frequency reduce the distortion in consumers' perception of price. Using treatment effects as suffcient statistics, I calculate gains in consumer surplus equivalent to 0.5-1 percent of annual water expenditures. Heterogeneous treatment effects suggest increases in outdoor water use.

Suggested Citation

  • Wichman, Casey J., 2015. "Information Provision and Consumer Behavior: A Natural Experiment in Billing Frequency," RFF Working Paper Series dp-15-35, Resources for the Future.
    • Handle: RePEc:rff:dpaper:dp-15-35
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    More about this item

    Keywords

    information provision; billing frequency; price perception; natural experiment; water demand; water conservation; welfare;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
    • Q21 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Demand and Supply; Prices
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water

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