‘‘Selection on Welfare Gains and Policy Design: Experimental Evidence from Electricity Plan Choice,’’ presented by Koichiro Ito of the University of Chicago.
We study a problem where policymakers need to screen self-selected individuals by unobserved heterogeneity in potential welfare gains from a policy intervention. In our framework, the marginal treatment effects arise as a key statistic to characterize 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 would generate larger social welfare gains—are more likely to self-select. We simulate policy counterfactuals and quantify the optimal take-up incentives that exploit both observed and unobserved heterogeneity in selection and welfare gains.
Sponsored by the Department of Economics Danforth-Lewis Speakers Series.