Dynamic Salience with Intermittent Billing: Evidence from Smart Electricity Meters

Gilbert, B and J Graff Zivin, “Dynamic Salience with Intermittent Billing: Evidence from Smart Electricity Meters.” Journal of Economic Behavior and Organization, 107(2014): 176-190.

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Digital tracking and the proliferation of automated payments have made intermittent billing more commonplace, and the frequency at which consumers receive price, quantity, or total expenditure signals may distort their choices. While this category of goods has expanded from household utilities, toll road access and software downloads to standard consumption goods paid by credit card or other “bill-me-later”-type systems, we know surprisingly little about how these payment patterns affect decisions. This paper exploits hourly household electricity consumption data collected by “smart” electricity meters to examine dynamic consumer behavior under intermittent expenditure signals. Households reduce consumption by 0.6–1% following receipt of an electricity bill, but the response varies considerably by household type and season. Our results also suggest that spending “reminders” can reduce peak demand, particularly during summer months. We discuss the implications for energy policy when intermittent billing combined with inattention induces consumption cycles.