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

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

“Nudge”-style interventions are often deemed successful if they generate large behavior change at low cost, 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-rel...

Full description

Saved in:
Bibliographic Details
Published in:American economic journal. Applied economics Vol. 11; no. 1; pp. 236 - 276
Main Authors: Allcott, Hunt, Kessler, Judd B.
Format: Journal Article
Language:English
Published: American Economic Association 01-01-2019
Subjects:
Behavior change
Economic models
Energy consumption
Intervention
Social comparison
Social welfare
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:“Nudge”-style interventions are often deemed successful if they generate large behavior change at low cost, 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 gains because they ignore significant costs incurred by nudge recipients. Overall, home energy report welfare gains might be overstated by $620 million. We develop a prediction algorithm for optimal targeting; this approach would double the welfare gains.
ISSN:1945-7782
1945-7790
DOI:10.1257/app.20170328