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Rationing Public Goods by Cooperation or Pecuniary Incentives: Evidence from the Spare-the-Air Program

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  • Sexton, Steven E.
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    Abstract

    Policy-makers have relied on non-coercive mechanisms to achieve socially optimal outcomes in a variety of contexts when prices fail to ration scarce resources. Amid heightened concern about environmental damage and climate change, public appeals for cooperation and pecuniary incentives are frequently used to achieve resource conservation and other prosocial behavior. Yet the relative effectiveness of these two instruments is poorly understood when pecuniary incentives are small. This paper examines the extent to which free transit fares and appeals for car trip avoidance reduce car pollution on smoggy days. Using data on freeway traffic volumes and transit ridership, public appeals for cooperation are shown to reduce car trips. The marginal effect of free transit fares, however, is to increase car trips. Public appeals are shown to increase carpooling but not transit ridership. Free fares increase transit ridership but not carpooling. These results suggest that free transit rides do not induce motorists to substitute to transit, but instead subsidize regular transit rides and additional trips. They support findings in the behavioral literature that extrinsic incentives can crowd-out altruism.

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    Bibliographic Info

    Paper provided by Department of Agricultural & Resource Economics, UC Berkeley in its series Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series with number qt5xs9r6t8.

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    Date of creation: 01 Jul 2010
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    Handle: RePEc:cdl:agrebk:qt5xs9r6t8

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    Keywords: Social and Behavioral Sciences;

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    1. Mayer, Lawrence S., 1978. "Estimating the effects of the onset of the energy crisis on residential energy demand," Resources and Energy, Elsevier, vol. 1(1), pages 57-92, September.
    2. Frey, Bruno S & Jegen, Reto, 2001. " Motivation Crowding Theory," Journal of Economic Surveys, Wiley Blackwell, vol. 15(5), pages 589-611, December.
    3. Akerlof, George A & Dickens, William T, 1982. "The Economic Consequences of Cognitive Dissonance," American Economic Review, American Economic Association, vol. 72(3), pages 307-19, June.
    4. Janssen, Maarten C. W. & Mendys-Kamphorst, Ewa, 2004. "The price of a price: on the crowding out and in of social norms," Journal of Economic Behavior & Organization, Elsevier, vol. 55(3), pages 377-395, November.
    5. Ronald Cummings & Mary Beth Walker, 2000. "Measuring the effectiveness of voluntary emission reduction programmes," Applied Economics, Taylor & Francis Journals, vol. 32(13), pages 1719-1726.
    6. A. E. Peck & O. C. Doering III, 1976. "Voluntarism and Price Response: Consumer Reaction to the Energy Shortage," Bell Journal of Economics, The RAND Corporation, vol. 7(1), pages 287-292, Spring.
    7. Jeffrey M. Wooldridge, 2003. "Cluster-Sample Methods in Applied Econometrics," American Economic Review, American Economic Association, vol. 93(2), pages 133-138, May.
    8. Chen, Chao, 2003. "Freeway Performance Measurement System (PeMS)," Institute of Transportation Studies, Research Reports, Working Papers, Proceedings qt6j93p90t, Institute of Transportation Studies, UC Berkeley.
    9. Andreoni, James, 1989. "Giving with Impure Altruism: Applications to Charity and Ricardian Equivalence," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1447-58, December.
    10. Cutter, W. Bowman & Neidell, Matthew, 2009. "Voluntary information programs and environmental regulation: Evidence from 'Spare the Air'," Journal of Environmental Economics and Management, Elsevier, vol. 58(3), pages 253-265, November.
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