"Nudge"-style interventions are often deemed successful if they generate large behavior change at low cost, but they are rarely subjected to full social welfare evaluations. We combine a field experiment with a simple theoretical framework to evaluate the welfare effects of one especially policy-relevant intervention, home energy social comparison reports. In our sample, the reports increase social welfare, although traditional evaluation approaches overstate gains because they ignore significant costs incurred by nudge recipients. Overall, home energy report welfare gains might be overstated by $620 million. We develop a prediction algorithm for optimal targeting; this approach would double the welfare gains.
Allcott, Hunt, and Judd B. Kessler.
"The Welfare Effects of Nudges: A Case Study of Energy Use Social Comparisons."
American Economic Journal: Applied Economics,
Micro-Based Behavioral Economics: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
Gas Utilities; Pipelines; Water Utilities
Energy: Demand and Supply; Prices
Energy: Government Policy