The Habit Forming Effects of Feedback: Evidence from a Large-Scale Field Experiment

Abstract

We document the dynamics of persistence using a large-scale field experiment that provides cost salience nudges with different cycles of duration. Households respond asymmetrically: behavior quickly adjusts to these nudges and sluggishly readjusts without them. We then develop a habit formation model that nests traditional consumption-based mechanisms and an attention-based mechanism that allows for dynamic responses to time-varying salience. Combining our field experiment and structural model, we validate the importance of attention dynamics and uncover a new solution concept for optimizing feedback interventions to create sustained behavioral change.

Keywords: Habit formation; Attention; Salience-enhancing feedback; Water usage; Randomized Control Trial; Structural Estimation

JEL Classification: C52, C93, D83, D91, L95, Q25