7. Environmental Behavioural Economics

Question 1

What is the classical economic response to environmental issues?

Answer 1

Carbon tax, subsidise sustainably generated energy, subsidise tree planting, carbon market

Question 2

What are problems with the classical economic response?

Answer 2

• setting efficient tax and subsidy levels is difficult
• tax increases are unpopular
• subsidies are expensive
• carbon market has been hard to implement

Question 3

Results of typical public goods game

Answer 3

People contribute snd are conditional co-operators

Question 4

What method can be done to identify conditional co-operators?

Answer 4

Ask participants how much they will contribute to the group project if others contribute (1-20)

Question 5

Results of Schulz et al field experiment on energy consumption

Answer 5

• those told they were below average consumed more energy, smiley face minimised this effect
• those above average reduced consumption but descriptive and smiley had a bigger impact
• feedback can backfire because of conditional co-operation

Question 6

Describe the Schultz et al field experiment

Answer 6

•treatment: either get a descriptive energy report or a descriptive plus smiley/sad face to invoke idea of injunctive social norm

Question 7

Reports of Alcott field experiment

Answer 7

• Average Treatment Effect reduction of -2.03%
• higher energy users made the largest reductions
• low energy users didn’t increase consumption
• no apparent effect of being judged by smiley face

Question 8

First order beliefs

Answer 8

A persons beliefs about what others will do

Question 9

Second order beliefs

Answer 9

A persons beliefs about what others expect them to do

Question 10

Describe study 1 from Jachimowicz et al

Answer 10

• FOB: ask participants to what extent they believe that reducing household energy contributed to saving the environment
• SOB: ask participants to what extent they think their neighbours also believe this

Question 11

Conclusion from Jachimowicz study 1

Answer 11

• SOB effect energy use but FOBs don’t at 5% sig level
• people follow descriptive norms more when they believe that other people in their community support the norm
• however there could be omitted variable bias in coefficient estimators

Question 12

Describe Jachimowicz study 2

Answer 12

• online experiment
• participants asked if they would reduce energy consumption
• two treatments they are in 11th or 89th percentile of energy conservation beliefs

Question 13

Results of study 2 Jachimowicz

Answer 13

Willingness to reduce energy was higher in the high treatment group- hypothesis supported

Question 14

Indirect reciprocity

Answer 14

Supports reputation based co-operation. “I will help you if you have helped others”

Question 15

Describe the helping game Engelmann and Fischbacher

Answer 15

• 16 participants online
• randomly matched into pairs with one donor and one recipient, these change randomly each round
• donor decides to help recipient or not
• control- donor has no knowledge of recipients score
• treatment- donor has knowledge of recipients score

Question 16

Results of helping game

Answer 16

• people are more likely to help those with a good reputation
• people are more likely to help when their helpfulness is observable by others

Question 17

Describe the Yoeli et al field experiment

Answer 17

• customers can volunteer to go allow their energy consumption to be restricted to prevent blackouts
• treatments volunteering is observable or anonymous

Question 18

Results of Yoeli et al experiment

Answer 18

• sign up was 3x higher in the observable treatment
• authors estimated offering $174 would yield the same effect
• there was greater sign up in observable treatment in apartments since they are a tighter community
• owners were more likely to sign up than renters