%0 Journal Article %A Meredith Fowlie %A Catherine Wolfram %A Patrick Baylis %A C Anna Spurlock %A Annika Todd-Blick %A Peter Cappers %B The Review of Economic Studies %D 2021 %G eng %N 6 %P 2886–2934 %R https://doi.org/10.1093/restud/rdab018 %T Default Effects and Follow-On Behaviour: Evidence From an Electricity Pricing Program %U https://academic.oup.com/restud/article-abstract/88/6/2886/6222168?redirectedFrom=fulltext %V 88 %8 04/2021 %X

We study default effects in the context of a residential electricity-pricing program. In the large-scale randomized controlled trial we analyse, one treatment group was given the option to opt-in to time-varying pricing while another was defaulted into the program but allowed to opt-out. We provide dramatic evidence of a default effect on program participation, consistent with previous research. A novel feature of our study is that we also observe how the default manipulation impacts customers’ subsequent electricity consumption. Passive consumers who did not opt-out but would not have opted in—comprising more than 70 $%$ of the sample—nonetheless reduce consumption in response to higher prices. Observing of this follow-on behaviour enables us to assess competing explanations for the default effect. We draw conclusions about the likely welfare effects of defaulting customers onto time-varying pricing.