Crowding-in, crowding-out and over-crowding: The interaction between price and quantity based instruments and intrinsic motivation

We conduct a field experiment involving real purchasing decisions in a large supermarket chain to test the effect of different regulatory interventions aiming to induce a more climate-friendly diet on intrinsic motivation. Focusing on shoppers who prefer the dirty variety, we compare labeling, a subsidy, a product ban and neutrally framed versions of the latter two in their ability to induce shoppers to switch to cleaner varieties. Carbon footprint labels and bans activate intrinsic motivation of shoppers (crowding-in). Remarkably, a subsidy framed as an explicit intervention is less effective than both a label and an equivalent but neutrally framed price change. The effects of information and changes in relative prices are not only not additive (crowding-out) but combined perform worse than each individually (over-crowding). We therefore find markedly different effects of price and quantity based instruments on intrinsic motivation.