Nudges in the marketplace: The response of household electricity consumption to information and monetary incentives

This paper provides field evidence from India examining changes in electricity consumption in response to various behavioral interventions. I study the impact of (i) weekly reports with peer comparisons of electricity use; (ii) reports augmented with monetary incentives to reduce consumption and (iii) price variation. I estimate consumption changes using a randomized control trial in conjunction with a quasi-experiment. Households provided reports alone reduced summer season consumption by 7 percent. Price elasticity identified from cross-sectional and time series variation was estimated at −0.56. Against this benchmark, the impact of peer comparisons alone was equivalent to increasing tariffs by about 12.5 percent. Counter-intuitively, when weekly reports were augmented with monetary incentives rewarding electricity conservation, households no longer reduced consumption. Households receiving reports also show higher price elasticity relative to controls. These results provide new evidence identifying the response of developing country consumers to behavioral interventions while examining the interaction of prices, incentives and information.