IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/21671.html
   My bibliography  Save this paper

The Welfare Effects of Nudges: A Case Study of Energy Use Social Comparisons

Author

Listed:
  • Hunt Allcott
  • Judd B. Kessler

Abstract

“Nudge”-style interventions are often deemed “successful” if they cause large behavior change, but they are rarely subjected to full social welfare evaluations. We combine a field experiment with a simple theoretical framework to evaluate the welfare effects of one especially policy-relevant intervention, home energy social comparison reports. In our sample, the reports increase social welfare, although traditional evaluation approaches overstate welfare gains by a factor of 3.7. Overall, the welfare gains from home energy reports might be overstated by $620 million. We develop a prediction algorithm for optimal targeting; this would double the welfare gains.

Suggested Citation

  • Hunt Allcott & Judd B. Kessler, 2015. "The Welfare Effects of Nudges: A Case Study of Energy Use Social Comparisons," NBER Working Papers 21671, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:21671
    Note: EEE PE
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w21671.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Dolan, Paul & Metcalfe, Robert, 2013. "Neighbors, knowledge, and nuggets: two natural field experiments on the role of incentives on energy conservation," LSE Research Online Documents on Economics 51563, London School of Economics and Political Science, LSE Library.
    2. Ian Ayres & Sophie Raseman & Alice Shih, 2013. "Evidence from Two Large Field Experiments that Peer Comparison Feedback Can Reduce Residential Energy Usage," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 29(5), pages 992-1022, October.
    3. Lucas W. Davis & Erich Muehlegger, 2010. "Do Americans consume too little natural gas? An empirical test of marginal cost pricing," RAND Journal of Economics, RAND Corporation, vol. 41(4), pages 791-810, December.
    4. Jonathan P. Beauchamp & Daniel J. Benjamin & Christopher F. Chabris & David I. Laibson, 2015. "Controlling for the Compromise Effect Debiases Estimates of Risk Preference Parameters," NBER Working Papers 21792, National Bureau of Economic Research, Inc.
    5. Dora L. Costa & Matthew E. Kahn, 2013. "Energy Conservation “Nudges” And Environmentalist Ideology: Evidence From A Randomized Residential Electricity Field Experiment," Journal of the European Economic Association, European Economic Association, vol. 11(3), pages 680-702, June.
    6. Gabriel D. Carroll & James J. Choi & David Laibson & Brigitte C. Madrian & Andrew Metrick, 2009. "Optimal Defaults and Active Decisions," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(4), pages 1639-1674.
    7. Koichiro Ito, 2014. "Do Consumers Respond to Marginal or Average Price? Evidence from Nonlinear Electricity Pricing," American Economic Review, American Economic Association, vol. 104(2), pages 537-563, February.
    8. Edward L. Glaeser, 2014. "The Supply of Environmentalism: Psychological Interventions and Economics," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 8(2), pages 208-229.
    9. Athey, Susan & Imbens, Guido W., 2015. "Machine Learning for Estimating Heterogeneous Causal Effects," Research Papers 3350, Stanford University, Graduate School of Business.
    10. Jin, Lawrence & Kenkel, Don & Liu, Feng & Wang, Hua, 2015. "Retrospective and Prospective Benefit-Cost Analyses of U.S. Anti-Smoking Policies 1," Journal of Benefit-Cost Analysis, Cambridge University Press, vol. 6(1), pages 154-186, April.
    11. Emir Kamenica, 2008. "Contextual Inference in Markets: On the Informational Content of Product Lines," American Economic Review, American Economic Association, vol. 98(5), pages 2127-2149, December.
    12. Keith M. Marzilli Ericson, 2014. "Consumer Inertia and Firm Pricing in the Medicare Part D Prescription Drug Insurance Exchange," American Economic Journal: Economic Policy, American Economic Association, vol. 6(1), pages 38-64, February.
    13. Emily Oster & Ira Shoulson & E. Ray Dorsey, 2013. "Optimal Expectations and Limited Medical Testing: Evidence from Huntington Disease," American Economic Review, American Economic Association, vol. 103(2), pages 804-830, April.
    14. Cutler, David M. & Jessup, Amber & Kenkel, Donald & Starr, Martha A., 2015. "Valuing Regulations Affecting Addictive or Habitual Goods," Journal of Benefit-Cost Analysis, Cambridge University Press, vol. 6(2), pages 247-280, July.
    15. James Andreoni & Justin M. Rao & Hannah Trachtman, 2017. "Avoiding the Ask: A Field Experiment on Altruism, Empathy, and Charitable Giving," Journal of Political Economy, University of Chicago Press, vol. 125(3), pages 625-653.
    16. Hunt Allcott, 2015. "Site Selection Bias in Program Evaluation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 130(3), pages 1117-1165.
    17. Hannah Trachtman & Andrew Steinkruger & Mackenzie Wood & Adam Wooster & James Andreoni & James J. Murphy & Justin M. Rao, 2014. "Fair Weather Avoidance: Unpacking Costs and Benefits in Replication of 'Avoiding the Ask'," NBER Working Papers 20385, National Bureau of Economic Research, Inc.
    18. Hunt Allcott, 2013. "The Welfare Effects of Misperceived Product Costs: Data and Calibrations from the Automobile Market," American Economic Journal: Economic Policy, American Economic Association, vol. 5(3), pages 30-66, August.
    19. Delmas, Magali A. & Fischlein, Miriam & Asensio, Omar I., 2013. "Information strategies and energy conservation behavior: A meta-analysis of experimental studies from 1975 to 2012," Energy Policy, Elsevier, vol. 61(C), pages 729-739.
    20. Hunt Allcott & Todd Rogers, 2014. "The Short-Run and Long-Run Effects of Behavioral Interventions: Experimental Evidence from Energy Conservation," American Economic Review, American Economic Association, vol. 104(10), pages 3003-3037, October.
    21. Benjamin R. Handel, 2013. "Adverse Selection and Inertia in Health Insurance Markets: When Nudging Hurts," American Economic Review, American Economic Association, vol. 103(7), pages 2643-2682, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Todd D. Gerarden & Richard G. Newell & Robert N. Stavins, 2017. "Assessing the Energy-Efficiency Gap," Journal of Economic Literature, American Economic Association, vol. 55(4), pages 1486-1525, December.
    2. Andor, Mark A. & Fels, Katja M., 2018. "Behavioral Economics and Energy Conservation – A Systematic Review of Non-price Interventions and Their Causal Effects," Ecological Economics, Elsevier, vol. 148(C), pages 178-210.
    3. Tonke, Sebastian, 2020. "Imperfect Procedural Knowledge: Evidence from a Field Experiment to Encourage Water Conservation," VfS Annual Conference 2020 (Virtual Conference): Gender Economics 224536, Verein für Socialpolitik / German Economic Association.
    4. Asensio, Omar Isaac & Delmas, Magali A., 2016. "The dynamics of behavior change: Evidence from energy conservation," Journal of Economic Behavior & Organization, Elsevier, vol. 126(PA), pages 196-212.
    5. Papineau, Maya & Rivers, Nicholas, 2022. "Experimental evidence on heat loss visualization and personalized information to motivate energy savings," Journal of Environmental Economics and Management, Elsevier, vol. 111(C).
    6. Cattaneo, Cristina & D’Adda, Giovanna & Tavoni, Massimo & Bonan, Jacopo, 2019. "Can We Make Social Information Programs More Effective? The Role of Identity and Values," RFF Working Paper Series 19-21, Resources for the Future.
    7. Damgaard, Mette Trier & Gravert, Christina, 2018. "The hidden costs of nudging: Experimental evidence from reminders in fundraising," Journal of Public Economics, Elsevier, vol. 157(C), pages 15-26.
    8. Bonan, Jacopo & Cattaneo, Cristina & d’Adda, Giovanna & Tavoni, Massimo, 2021. "Can social information programs be more effective? The role of environmental identity for energy conservation," Journal of Environmental Economics and Management, Elsevier, vol. 108(C).
    9. d'Adda, Giovanna & Galliera, Arianna & Tavoni, Massimo, 2020. "Urgency and engagement: Empirical evidence from a large-scale intervention on energy use awareness," Journal of Economic Psychology, Elsevier, vol. 81(C).
    10. Bonan, J. & Cattaneo, C. & d’Adda, G. & Galliera, A. & Tavoni, M., 2024. "Widening the scope: The direct and spillover effects of nudging water efficiency in the presence of other behavioral interventions," Journal of Environmental Economics and Management, Elsevier, vol. 127(C).
    11. Astier, Nicolas, 2018. "Comparative feedbacks under incomplete information," Resource and Energy Economics, Elsevier, vol. 54(C), pages 90-108.
    12. Daniel A. Brent & Corey Lott & Michael Taylor & Joseph Cook & Kimberly Rollins & Shawn Stoddard, 2020. "What Causes Heterogeneous Responses to Social Comparison Messages for Water Conservation?," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 77(3), pages 503-537, November.
    13. Kim, Jin Han & Kaemingk, Michael, 2021. "Persisting effects of social norm feedback letters in reducing household electricity usage in Post-Soviet Eastern Europe: A randomized controlled trial," Journal of Economic Behavior & Organization, Elsevier, vol. 191(C), pages 153-161.
    14. John A. List & Robert D. Metcalfe & Michael K. Price & Florian Rundhammer, 2017. "Harnessing Policy Complementarities to Conserve Energy: Evidence from a Natural Field Experiment," Experimental Economics Center Working Paper Series 2017-05, Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University.
    15. Alec Brandon & Paul Ferraro & John List & Robert Metcalfe & Michael Price & Florian Rundhammer, 2017. "Do the effects of social nudges persist? Theory and evidence from 38 natural field experiments," Natural Field Experiments 00598, The Field Experiments Website.
    16. Andor, Mark A. & Gerster, Andreas & Peters, Jörg & Schmidt, Christoph M., 2020. "Social Norms and Energy Conservation Beyond the US," Journal of Environmental Economics and Management, Elsevier, vol. 103(C).
    17. Sudarshan, Anant, 2017. "Nudges in the marketplace: The response of household electricity consumption to information and monetary incentives," Journal of Economic Behavior & Organization, Elsevier, vol. 134(C), pages 320-335.
    18. Robert W. Hahn & Robert D. Metcalfe, 2021. "Efficiency and Equity Impacts of Energy Subsidies," American Economic Review, American Economic Association, vol. 111(5), pages 1658-1688, May.
    19. Gabriela Michalek & Georg Meran & Reimund Schwarze & Özgür Yildiz, 2015. "Nudging as a new 'soft' tool in environmental policy. An analysis based on insights from cognitive and social psychology," Discussion Paper Series RECAP15 21, RECAP15, European University Viadrina, Frankfurt (Oder).
    20. Alec Brandon & Paul J. Ferraro & John A. List & Robert D. Metcalfe & Michael K. Price & Florian Rundhammer, 2017. "Do The Effects of Nudges Persist? Theory and Evidence from 38 Natural Field Experiments," NBER Working Papers 23277, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:21671. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.