American Economic Journal:
Applied Economics
ISSN 1945-7782 (Print) | ISSN 1945-7790 (Online)
The Welfare Effects of Nudges: A Case Study of Energy Use Social Comparisons
American Economic Journal: Applied Economics
vol. 11,
no. 1, January 2019
(pp. 236–76)
Abstract
"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.Citation
Allcott, Hunt, and Judd B. Kessler. 2019. "The Welfare Effects of Nudges: A Case Study of Energy Use Social Comparisons." American Economic Journal: Applied Economics, 11 (1): 236–76. DOI: 10.1257/app.20170328Additional Materials
JEL Classification
- C93 Field Experiments
- D91 Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
- L95 Gas Utilities; Pipelines; Water Utilities
- Q41 Energy: Demand and Supply; Prices
- Q48 Energy: Government Policy
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