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Nudges and peak pricing: A common pool resource energy conservation experiment

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  • Buckley, Penelope
  • Llerena, Daniel

Abstract

Using a contextualised common pool resource framework, individual energy consumption choices are studied. Individuals are nudged towards the socially optimal level of consumption by the use of a happy (sad) face if they are underconsuming (overconsuming). A price is set to incentivise a second group to choose the level of consumption observed in the nudge treatment in order to quantify the nudge via an equivalent price. Across all 10 periods, consumption is significantly lower in treatment groups compared to control groups without nudges and prices. The price treatment leads to an average level of consumption above the Nash equilibrium. There are implications for policy makers as the nudge treatment performs as well, on average, as an equivalent price without the implied loss of welfare, and is understood and integrated into subjects’ decision making quicker than an equivalent price. However, there is a tendency for both the nudge and the price to reinforce existing consumption behaviour as those who overconsume continue to overconsume.

Suggested Citation

  • Buckley, Penelope & Llerena, Daniel, 2022. "Nudges and peak pricing: A common pool resource energy conservation experiment," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 101(C).
  • Handle: RePEc:eee:soceco:v:101:y:2022:i:c:s2214804322000994
    DOI: 10.1016/j.socec.2022.101928
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    More about this item

    Keywords

    Energy conservation; Financial incentive; Laboratory experiment; Nudge;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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