Automatic Bill Payment and Salience Effects: Evidence from Electricity Consumption

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.

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