The Welfare Effects of Nudges: A Case Study of Energy Use Social Comparisons

75 Pages Posted: 26 Oct 2015 Last revised: 20 Mar 2021

See all articles by Hunt Allcott

Hunt Allcott

New York University (NYU)

Judd B. Kessler

University of Pennsylvania - Business & Public Policy Department

Date Written: October 2015

Abstract

“Nudge”-style interventions are often deemed “successful” if they cause large behavior change, 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 welfare gains by a factor of 3.7. Overall, the welfare gains from home energy reports might be overstated by $620 million. We develop a prediction algorithm for optimal targeting; this would double the welfare gains.

Suggested Citation

Allcott, Hunt and Kessler, Judd B., The Welfare Effects of Nudges: A Case Study of Energy Use Social Comparisons (October 2015). NBER Working Paper No. w21671, Available at SSRN: https://ssrn.com/abstract=2679710

Hunt Allcott (Contact Author)

New York University (NYU) ( email )

Bobst Library, E-resource Acquisitions
20 Cooper Square 3rd Floor
New York, NY 10003-711
United States

Judd B. Kessler

University of Pennsylvania - Business & Public Policy Department ( email )

3641 Locust Walk
Philadelphia, PA 19104-6372
United States

HOME PAGE: http://https://bepp.wharton.upenn.edu/profile/1671/

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