Do Behavioral Nudges Interact With Prevailing Economic Incentives? Pairing Experimental and Quasi-Experimental Evidence From Water Consumption

This working paper examines how the interaction of behavioral interventions and utility prices affects consumer water conservation.

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Date

Jan. 12, 2022

Authors

Daniel Brent and Casey Wichman

Publication

Working Paper

Reading time

1 minute

Abstract

Behavioral nudges are popular instruments to promote prosocial behavior, particularly in settings with unpriced externalities. Nudges may interact with existing incentives, however, by crowding out intrinsic motivation to conserve or by increasing price salience. We investigate the interaction of prices and nudges for water conservation in two experiments in neighboring utilities. First, we layer randomized behavioral treatments on top of price variation driven by lot-size thresholds that exogenously assign marginal prices. Second, we explore whether behavioral treatments affect consumers’ price elasticities. Our findings suggest that nudges do not induce more conservation at higher prices, nor do they increase price sensitivity.

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