Discussion Paper

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

Dec 28, 2016 | Casey J. Wichman

Abstract

In this study, I estimate a causal effect of increased billing frequency on consumer behavior. I exploit a natural experiment in which residential water customers switched exogenously from bimonthly to monthly billing. Customers increase consumption by 3.5-5 percent in response to more frequent information. This result is reconciled in models of price and quantity uncertainty, where increases in billing frequency reduce the distortion in consumer perceptions. Using treatment effects as sufficient statistics, I calculate consumer welfare gains equivalent to 0.5-1 percent of annual water expenditures. Heterogeneous treatment effects suggest increases in outdoor water use.