Neighbors, Knowledge, and Nuggets : Two Natural Field Experiments on the Role of Incentives on Energy Conservation

There is increasing research on the impact of social norms on economic behavior. The research to date has a number of limitations: 1) it has not de-coupled the impact of the norm and the knowledge required to understand how to change behavior based upon it; and 2) it has not understood the impact of social norms under different incentive structures. We address these limitations using two natural field experiments. We find, firstly, that norms change energy consumption irrespective of whether information is provided or not. We find that social norms reduce consumption by around 6% (0.2 standard deviations). Secondly, we find that large financial rewards for targeted consumption reductions work very well in reducing consumption, with a 8% reduction (0.35 standard deviations) in energy consumption. The effect persists even when the financial incentive has been removed, suggesting no crowding out of financial incentives. Perhaps most interestingly, we find that the large effect of financial incentives completely disappears when information on social norms is included