Social Comparison and Real-Time Feedback Interventions to Reduce Resource Use
Introduction
Andor et al. (2023) implement a randomized control trial (RCT) in Germany to test the welfare impacts of two different behavioral interventions aimed at reducing resource use. In particular, this RCT tests whether social comparison or real-time feedback are able to reduce the amount of water used per shower. All participants in the RCT were sent a smart shower head equipped to measure and record real-time water use. The social comparison group received a weekly newsletter about their water use per shower compared to reference households (in the control group). The real-time feedback group had their smart shower head activated such that during showers it lit up different colors to indicate how much water had been used. A third treatment group was given both of these interventions. The interventions lasted four weeks.
On average, the social comparison treatment reduced water use per shower by 9.4%, the real-time feedback intervention reduced by 28.8% and both treatments together reduced per-shower water use by 35%.
The paper elicits individual willingness to pay for four weeks of each intervention through surveys in the form of multiple price lists. This allows the paper to construct the MVPF of a government policy which provides both the social comparison intervention and the real-time feedback intervention to the population. They separately construct MVPFs for the social comparison intervention and real-time feedback intervention implemented individually.
MVPF = 7.9
Net Cost
The paper measures the direct cost of the intervention per person per month. The paper assumes a retail cost per smart shower head to be €80 and that the shower heads will last for five years. Therefore, the cost per month of the shower head is €80/(5×12) = €1.33. The paper assumes no operational costs as they are expected to be low once the intervention is on a large scale. The paper also assumes no fiscal externality of the intervention.
Willingness to Pay
The willingness to pay is defined as the self-reported willingness to pay for the intervention plus the positive environmental externalities from reduced water usage.
The paper finds on average that individuals are willing to pay €9.67 for one month of the social comparison intervention. The paper assumes that this willingness to pay persists for the entire lifetime of the shower head.
The paper uses the average shower temperature to estimate that one liter of shower water use creates 15 grams of CO2. The paper assumes a social cost of carbon of €160 per metric ton from Rennert et al. (2022), yielding a social cost of €0.0024 per liter of shower water.
As the social comparison intervention reduced water use per shower by 11.91 liters and on average people take 31 showers per month, the paper estimates a positive environmental externality from reduced water usage of €0.0024 x 31 x 11.91 = €0.886.
Thus the total willingness to pay is €9.67 + €0.89 = €10.56.
MVPF Summary
With a total willingness to pay per month of €10.56 and a net cost of €1.33 per month, Andor et al. (2023) finds an MVPF for social comparison of 7.92.
The paper also includes alternate MVPFs for a conservative scenario and an opt-in scenario.
In the conservative scenario, the paper uses smaller estimates found in the literature for both individual willingness to pay and treatment effects. To align with results found in Allcott and Kessler (2019) the individual willingness to pay is reduced by 72 percent.
Tiefenbeck et al. (2019) finds smaller effect sizes from a similar water-usage intervention, so for the conservative scenario, the estimated effects on water usage are scaled down by 60.1%. This effects the size of the environmental externalities in the numerator. The cost is not changed.
This results in a conservative MVPF for social comparison of 2.27.
In the opt-in scenario, only the sample with a non-zero willingness to pay is included. This is relevant as unless the government chooses to mandate these interventions, only people with a positive willingness to pay would receive the intervention. The cost is not changed.
This results in an “opt-in” MVPF for social comparison of 9.55.
References
Allcot, Hunt and Judd 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: https://doi.org/10.1257/app.20170328.
Andor, Mark, Lorenz Goette, Michael K. Price, Anna Schulze Tilling, and Lukas Tomberg (2023). “Differences in How and Why Social Comparison and Real-Time Feedback Impact Resource Use: Evidence From a Field Experiment.” NBER Working Paper 31845. http://www.nber.org/papers/w31845.
Rennert, Kevin, Frank Errickson, and Brian C. Prest (2022). “Comprehensive Evidence Implies a Higher Social Cost of CO2.” Nature, 610(7933):687-692. DOI: https://doi.org/10.1038/s41586-022-05224-9.
Tiefenbeck, Verena, Anselma Wörner, and Samuel Schlöb (2019). “Real-time Feedback Promotes Energy Conservation in the Absence of Volunteer Selection Bias and Monetary Incentives.” Nature Energy, 4(1):35-41. DOI: https://doi.org/10.1038/s41560-018-0282-1.
Policy Features
- Category
- Environment
- Sub-Category
- Environmental Subsidies
- Beneficiary Type(s)
- Adults, Children and Youth
- Average Age
- 54
- Average Income
- 41879
- Country of Implementation
- Germany
- Year of Implementation
- 2020-2021
- Empirical Method
- RCT
- Research Type
- Primary
- Peer Reviewed
- No
- MVPF Publication Link
- www.nber.org/papers/w31845