Are Economics and Psychology Operating on Different Margins? Evidence from a Natural Experiment on Household Technology Diffusion

Abstract

This paper uses a field experiment and structural model to estimate the eff ects of prices and social norms on the decision to adopt a new household technology. Reduced form estimates show that while prices aff ect behavior along both the extensive and intensive margins, social norms only impact the extensive margin decision. Structural estimates uncover a negative correlation between behavioral parameters of our model: curiosity and social pressure . This points to important heterogeneity in the welfare eff ects of our intervention: whereas some consumers are “curious” and welcome the opportunity to learn about and purchase the new technology, others have no interest in learning about the technology and are made worse o ↵ by the social pressure of the ask. Policy simulations highlight a complementary relationship between psychological and economic instruments; the subsidy required to achieve any level of adoption is lower when combined with the provision of normative statements.

Keywords: Technology diffusion, field experiments.