Encouraging consumer activity through automatic switching of the electricity contract - A field experiment

Consumer behavior in terms of regular searching for and switching between suppliers is key to induce competition in markets and to increase efficiency. In the electricity market, though, we observe very little switching activity. One way to engage consumers may be to automate the choice of the contract. However, little is known about the determinants of consumers’ use of automation services. To address this question, we present a stylized model of how households take their decision to enroll into an automation service and, based on that, run a field experiment with about 2600 customers of a German service provider that offers its customers to automatically switch between electricity contracts on their behalf. We provide evidence that arguments derived from our stylized model that aim to increase the take up of the automation service can be ineffective or even have detrimental effects. Thereby, we provide evidence that it might be difficult to realize potential efficiency-gains of a digitized world. •Automatic contract choice may increase consumer activity in the electricity market.•We develop a stylized choice structure of what makes consumers opt for automation.•Based on that, we run a field experiment with 2600 German electricity consumers.•We find that common arguments to promote automation can be ineffective or harmful.