The welfare effects of nudges: A case study of energy use social comparisons

Hunt Allcott, Judd B. Kessler

    Research output: Contribution to journalArticle

    Abstract

    "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.

    Original languageEnglish (US)
    Pages (from-to)236-276
    Number of pages41
    JournalAmerican Economic Journal: Applied Economics
    Volume11
    Issue number1
    DOIs
    StatePublished - 2019

    ASJC Scopus subject areas

    • Economics, Econometrics and Finance(all)

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