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The behavioural effect of Pigovian regulation: Evidence from a field experiment

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  • Bruno Lanz
  • Jules-Daniel Wurlod
  • Luca Panzone
  • Timo Swanson

Abstract

Monetary incentives associated with Pigovian regulation may crowd-out intrinsic motivation to mitigate an externality. We quantify this behavioral effect using data from an experiment with real product choices together with a structural model of consumer behavior. First we show that information about products' embodied carbon induces a voluntary shift to cleaner products, and we estimate that intrinsic motivation is equivalent to a change in relative prices of GBP25-167/tCO2. Second, the impact of a Pigovian intervention in proportion to embodied carbon (GBP19/tCO2) suggests significant motivation crowding, and compensating this behavioral bias would require increasing the Pigovian price signal by GBP0.60-170/tCO2. Finally, based on a cross-product comparison, we find that motivation crowding declines with the cost (or effort) of provision. This suggests that, on account of motivation crowding, environmental taxes ought to be set higher for products with price elastic demand.

Suggested Citation

  • Bruno Lanz & Jules-Daniel Wurlod & Luca Panzone & Timo Swanson, 2015. "The behavioural effect of Pigovian regulation: Evidence from a field experiment," CIES Research Paper series 32-2014, Centre for International Environmental Studies, The Graduate Institute.
    • Handle: RePEc:gii:ciesrp:cies_rp_32
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    Cited by:

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    2. Fei Gao & Gilvan C. Souza, 2022. "Carbon Offsetting with Eco-Conscious Consumers," Management Science, INFORMS, vol. 68(11), pages 7879-7897, November.
    3. Lang, Ghislaine & Farsi, Mehdi & Lanz, Bruno & Weber, Sylvain, 2021. "Energy efficiency and heating technology investments: Manipulating financial information in a discrete choice experiment," Resource and Energy Economics, Elsevier, vol. 64(C).
    4. Mattauch, Linus & Hepburn, Cameron & Spuler, Fiona & Stern, Nicholas, 2022. "The economics of climate change with endogenous preferences," Resource and Energy Economics, Elsevier, vol. 69(C).
    5. Mattauch, Linus & Hepburn, Cameron & Stern, Nicholas, 2018. "Pigou pushes preferences: decarbonisation and endogenous values," INET Oxford Working Papers 2018-16, Institute for New Economic Thinking at the Oxford Martin School, University of Oxford.
    6. Maïmouna Yokessa & Stéphan Marette, 2019. "A Tax Coming from the IPCC Carbon Prices Cannot Change Consumption: Evidence from an Experiment," Sustainability, MDPI, vol. 11(18), pages 1-20, September.
    7. Bartels, Lara & Werthschulte, Madeline, 2023. ""More bang for the buck"? Evidence on the effectiveness of an energy efficiency subsidy," ZEW Discussion Papers 23-022, ZEW - Leibniz Centre for European Economic Research.
    8. Yunlong Cheng & Jian Yang, 2023. "Spatial and Temporal Divergence in the Coupling Coordination of Digital Economy, Environmental Regulation and Sustainable Development: An Experience Study in China," Sustainability, MDPI, vol. 15(12), pages 1-16, June.
    9. Yan Ma & Susu Cheng, 2023. "Channel coordination in a closed‐loop supply chain with fairness concerns under further extended producer responsibility," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(2), pages 876-891, March.
    10. Giorgos N. Diakoulakis & Athanasios Kampas, 2023. "Emission taxes for genuine altruistic firms," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 94(1), pages 343-359, March.
    11. Stiglitz, Joseph E., 2019. "Addressing climate change through price and non-price interventions," European Economic Review, Elsevier, vol. 119(C), pages 594-612.
    12. Lang, Ghislaine & Lanz, Bruno, 2021. "Energy efficiency, information, and the acceptability of rent increases: A survey experiment with tenants," Energy Economics, Elsevier, vol. 95(C).
    13. Franziska Funke & Linus Mattauch & Inge van den Bijgaart & H. Charles J. Godfray & Cameron Hepburn & David Klenert & Marco Springmann & Nicolas Treich, 2022. "Toward Optimal Meat Pricing: Is It Time to Tax Meat Consumption?," Review of Environmental Economics and Policy, University of Chicago Press, vol. 16(2), pages 219-240.
    14. Bazoche, Pascale & Guinet, Nicolas & Poret, Sylvaine & Teyssier, Sabrina, 2021. "Does the provision of information increase the substitution of animal proteins with plant-based proteins? An experimental investigation into consumer choices," Working Papers 313663, Institut National de la recherche Agronomique (INRA), Departement Sciences Sociales, Agriculture et Alimentation, Espace et Environnement (SAE2).
    15. Lohmann, Paul M. & Gsottbauer, Elisabeth & Doherty, Anya & Kontoleon, Andreas, 2022. "Do carbon footprint labels promote climatarian diets? Evidence from a large-scale field experiment," Journal of Environmental Economics and Management, Elsevier, vol. 114(C).
    16. Pascale Bazoche & Nicolas Guinet & Sylvaine Poret & Sabrina Teyssier, 2021. "Does the provision of information increase the substitution of animal proteins with plant-based proteins? An experimental investigation into consumer choices [L’apport d’informations augmente-t-il ," Working Papers hal-03350356, HAL.
    17. Bazoche, Pascale & Guinet, Nicolas & Poret, Sylvaine & Teyssier, Sabrina, 2023. "Does the provision of information increase the substitution of animal proteins with plant-based proteins? An experimental investigation into consumer choices," Food Policy, Elsevier, vol. 116(C).
    18. Houde, Sebastien & Aldy, Joseph E., 2017. "The Efficiency Consequences of Heterogeneous Behavioral Responses to Energy Fiscal Policies," Working Paper Series rwp17-047, Harvard University, John F. Kennedy School of Government.
    19. Houde, Sebastien & Aldy, Joseph E., 2017. "The Efficiency Consequences of Heterogeneous Behavioral Responses to Energy Fiscal Policies," RFF Working Paper Series 17-24, Resources for the Future.

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    More about this item

    Keywords

    Motivation crowding; Pigovian regulation; Information; Behavioral agents; Field experiments; Policy instruments.;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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