Ito, Koichiro, Ida, Takanori, and Tanaka, Makoto “The Persistence of Moral Suasion and Economic Incentives: Field Experimental Evidence from Energy Demand” (Revised April 2015) (Revised version published in the American Economic Journal: Economic Policy, 10(1): 1-29) | WP-257R | Blog
Firms and governments often use moral suasion and economic incentives to influence intrinsic and extrinsic motivations for various economic activities. To investigate the persistence of such interventions, we randomly assigned households to moral suasion and dynamic pricing that stimulate energy conservation during peak demand hours. Using household-level consumption data for 30-minute intervals, we find significant short-run effects of moral suasion, but the effects diminished quickly after repeated interventions. Economic incentives produced larger and persistent effects, which induced habit formation after the final interventions. While each policy produces substantial welfare gains, economic incentives provide particularly large gains when we consider persistence.