Selection on Welfare Gains: Experimental Evidence from Electricity Plan Choice

We study a problem in which policymakers need to screen self- selected individuals by unobserved heterogeneity in social welfare gains from a policy intervention. In our framework, the marginal treatment effects and marginal treatment responses arise as key statistics to characterize social welfare. We apply this framework to a randomized field experiment on electricity plan choice. Consumers were offered welfare- improving dynamic pricing with randomly assigned take- up incentives. We find that price- elastic consumers-who generate larger welfare gains-are more likely to self- select. Our counterfactual simulations quantify the optimal take- up incentives that exploit observed and unobserved heterogeneity in selection and welfare gains.