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Automatic Bill Payment and Salience Effects: Evidence from Electricity Consumption

Author

Listed:
  • Steven Sexton

    (Duke University)

Abstract
The introduction of automatic bill payment (ABP) programs in 2005 eliminated the need for consumers to view recurring bills. If those enrolled in ABP programs offered by utilities and other service providers forgo inspection of their recurring bills, then price salience declines, prices perceived by boundedly rational agents fall, and consumption increases. This paper considers the impact of such programs on consumer demand and welfare and empirically tests whether enrollment in such programs increases demand. Results show ABP enrollment increases residential electricity consumption by 4.0% and commercial electricity consumption by as much as 8.1%. Enrollment in programs designed to smooth seasonal variation in monthly utility bills of low-income customers results in 6.7% greater electricity use. © 2015 The President and Fellows of Harvard College and the Massachusetts Institute of Technology

Suggested Citation

  • Steven Sexton, 2015. "Automatic Bill Payment and Salience Effects: Evidence from Electricity Consumption," The Review of Economics and Statistics, MIT Press, vol. 97(2), pages 229-241, May.
    • Handle: RePEc:tpr:restat:v:97:y:2015:i:2:p:229-241
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    File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/REST_a_00465
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    More about this item

    Keywords

    automatic bill payment; ABP; bills; recurring bills; price salience; consumption; consumer demand; welfare; electricity sonsumption;
    All these keywords.

    JEL classification:

    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • P00 - Political Economy and Comparative Economic Systems - - General - - - General
    • G00 - Financial Economics - - General - - - General

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