Are Price Changes More Effective than Nudging to Reduce Water Use?

This study evaluates the effects of two exogenous interventions targeting individuals with both pecuniary and nonpecuniary incentives, increasing the moral and monetary costs of residential water use. The first intervention consisted of a social information campaign appealing to norm-based behavior, and the second of a change in water tariffs. The timing and order of the interventions provide a unique opportunity to separately assess both the individual and combined effects of this policy mix. The empirical analysis was conducted on the same sample of households in the field experiment by Jaime and Carlsson (2018). Results reveal that both nonpecuniary and pecuniary incentives significantly reduce water use when each instrument is applied separately, with the change in tariffs generating larger reductions in water use, compared with information provision. However, the effectiveness of the combined policy depends on the setting of implementation. While crowding out effects are likely to arise when social information is provided in combination the tariff change, compared with introducing monetary incentives alone, the largest reductions in water use are achieved when the instruments are jointly implemented. Findings shed light on the importance of accurately defining the timing and order of the interventions to maximize their impact on resource conservation