Moral Suasion and Economic Incentives: Field Experimental Evidence from Energy Demand

Abstract

Firms and governments often use moral suasion and economic incentives to influence intrinsic and extrinsic motivations for economic activities. To investigate persistence of such interventions, we randomly assign households to moral suasion and dynamic pricing that stimulate energy conservation during peak-demand hours. We find significant habituation and dishabituation for moral suasion—the treatment effect diminishes after repeated interventions but can be restored to the original level by a sufficient time interval between interventions. Economic incentives induce larger treatment effects, little habituation, and significant habit formation. Our results suggest moral suasion and economic incentives produce substantially different short-run and long-run policy impacts.

JEL Classification: C93, D83, L94, L98, Q41, Q48)