Moral Suasion and Economic Incentives: Field Experimental Evidence from Energy Demand

Key Findings

The study finds that financial incentives are the most effective way to encourage significant, long-lasting changes in electricity consumption. In particular:

• Households that received the messages encouraging conservation reduced their electricity use by 8 percent in the short term, but they quickly resorted back to their usual habits. Over the long-term, the messages to voluntarily reduce electricity had near zero impact.
•  Those who experienced a hike in the price of electricity during peak hours reduced their electricity use by as much as 17 percent, and the effect is much more sustained over time.
• •Finally, higher prices resulted in a change in habits that outlasted the intervention. Even after the intervention ended, households in this group continued to conserve energy. The researchers find that this is not related to a change in capital stock (i.e., new appliances), but rather changes in behavior. The messaging group experienced no change in behavior.