Daniel A. Brent

Social comparisons, household water use, and participation in utility conservation programs: evidence from three randomized trials

Regulation and political opposition often force water utilities to rely on nonprice approaches to manage water demand. Using randomized field experiments in three different water utilities, we assess the effectiveness of social comparisons to reduce demand and analyze their interaction with existing conservation programs. In two utilities, the program decreases consumption by 5%, with significant heterogeneity across the distribution of baseline water use. We do not detect a statistically significant average treatment effect in the third utility. Social norms do not appear to crowd out existing conservation programs: treated households are more likely to participate in additional programs. Of the two utilities with significant treatment effects, higher participation rates in conservation programs account for a very small fraction of water savings (3%) in one utility and a modest fraction (9%–25%) in the second. We discuss evidence that social norms may induce participation among the specific type of consumers that utilities wish to target.

Dynamic road pricing and the value of time and reliability

High Occupancy Toll (HOT) lanes that use dynamic pricing to manage congestion and generate revenue are increasingly popular but poorly understood. In this paper we estimate the behavioral response of drivers to dynamic pricing in a HOT lane. The challenge in estimation lies in the simultaneity of price and demand: the structure of dynamic tolling ensures that prices increase as more drivers enter the HOT lane. Prior research has found that higher prices in HOT lanes increase usage. We find that after controlling for simultaneity arising from autocorrelation HOT drivers instead respond to tolls in a manner consistent with economic theory. The average response to a 10% increase in the toll is a 2% reduction in usage. Drivers primarily value travel reliability over time savings, although there is heterogeneity in the relative values of time and reliability based on time of day and destination to or from work. The results highlight the importance of both controlling for simultaneity when estimating demand for dynamically priced toll roads and treating HOT lanes with dynamic prices as a di erentiated product with bundled attributes.

Behavioral Insights from Field Experiments in Environmental Economics

Many environmental decisions are based on intrinsic motivations in addition to traditional economic incentives. Field experiments allow researchers to isolate a specific causal mechanism which can help advance our understanding of consumer and firm behavior in environmental markets. This article summarizes the literature on the use of field experiments in environmental economics, focusing on framed and artefactual field experiments as well as natural experiments targeting municipal energy and water demand. We set out a theoretical framework to improve the interpretation of results from field experiments in environmental economics. In addition to providing an overview of experimental methods and findings we also lay out a set of challenges for researchers interested in running a field experiment in environmental economics.

Valuing environmental services provided by local stormwater management

Decentralized stormwater management systems deliver a number of environmental services that go beyond the reduction of flood risk, which has been the focus of con-ventional stormwater systems. Not all of these services may be equally valued by the public, however. This paper estimates households’ willingness to pay (WTP) for im-provements in water security, stream health, amenity values, as well as the reduction in flood risk and urban heat island effect. We use data from nearly 1,000 personal interviews with residential homeowners in Melbourne and Sydney, Australia. Our re-sults suggest that the WTP for the highest levels of all environmental services is A

Taxation, redistribution and observability in social dilemmas

409 per household per year. WTP is mainly driven by the residents’ positive valuation for exemptions in water restrictions, improvements in local stream health, and decreased peak urban temperatures. We further conduct a benefit transfer analysis and find that the WTP is not significantly different between the study areas. Our findings provide additional support that decentralized stormwater management systems have large non-market benefits and that, under certain conditions, benefit values can be transferred to different locations.

Traffic and crime

In the presence of social dilemmas, cooperation is more difficult to achieve when populations are heterogeneous because of conflicting interests within groups. We examine cooperation in the context of a non-linear common pool resource game, in which individuals have unequal extraction capacities and have to decide on their extraction of resources from the common pool. We introduce monetary and nonmonetary policy instruments in this environment. One instrument is based on two variants of a mechanism that taxes extraction and redistributes the tax revenue. The other instrument varies the observability of individual decisions. We find that the two tax and redistribution mechanisms reduce extraction, increase efficiency and decrease inequality within groups. The scarcity pricing mechanism, which is a per-unit tax equal to the marginal extraction externality, is more effective at reducing extraction than an increasing block tax that only taxes units extracted above the social optimum. In contrast, observability impacts only the Baseline condition by encouraging free-riding instead of creating moral pressure to cooperate.