Saturday, April 8, 2017

Do The Effects of Social Nudges Persist? Theory and Evidence from 38 Natural Field Experiments

This study examines the mechanisms underlying long-run reductions in energy consumption caused by a widely studied social nudge. Our investigation considers two channels: physical capital in the home and habit formation in the household. Using data from 38 natural field experiments, we isolate the role of physical capital by comparing treatment and control homes after the original household moves, which ends treatment. We find 35 to 55 percent of the reductions persist once treatment ends and show this is consonant with the physical capital channel. Methodologically, our findings have important implications for the design and assessment of behavioral interventions.
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Panel B of Table 6 presents the results of this exercise for the treatment and premove period. Consistent with Alcott and Rogers 2014 (AR), we start by assuming the direct cost of administering the Home Energy Report (HER) to one household is $1 per report. Following the standard approach in the literature, we simply compare this direct cost to savings achieved by the HER as estimated in Column 1 of Table 2 (-24.98 kWh) (No Technology). To also account for the indirect costs of the HER, we use a lower-bound estimate of the cost of capital per kWh of electricity saved in Allcott and Greenstone (2012, pp. 17).37 With this cost estimate, we convert savings achieved by capital investment—as a proportion of total savings using our estimates of persistence in the first row—into dollars. Applying this conversion, we see that the Home Energy HER induces an indirect cost that ranges from $0.74 to $1.15 per report and household. The resulting cost-effectiveness is reported in the last row for all three subsamples (Technology)

Comparing the two approaches to estimating cost-effectiveness in Panel B of Table 6, we see that incorporating the indirect cost of investments in capital more than doubles the cost per kWh in two out of three cases. From this perspective, after accounting for direct and indirect costs of technology adoption, alternative programs to the HER discussed in Allcott and Mullainathan (2010) and Allcott and Greenstone (2012) appear much more attractive. 

by Alec Brandon, Paul J. Ferraro, John A. List, Robert D. Metcalfe, Michael K. Price and Florian Rundhammer
National Bureau of Economic Research (NBER)
NBER Working Paper No. 23277; Issued in March 2017

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