L10 - Consumer Policy

Question 1

Discuss traditional approach to consumer policy

Answer 1

Restrictions (bans, laws, regulations in order to change what people buy etc.)

Incentives: carrots and sticks – surcharges, interests

Increased information – more information means they are more likely to make an informed decision

Question 2

Discuss behaviourally informed approaches to consumer policy

Theories, methods, research findings, ethics

Schulz et al. (2007) - energy consumption study

Answer 2

Focus on changing contexts/environments to ‘nudge’ choices and actions in desirable/beneficial directions

Methods:
o Gold standard: randomised control trials (RCTs)
o Iterative

• 290 households in California
  o Above average vs. below average energy consumption
• Took baseline readings of daily energy use
• Manipulated type of norm information:
  o Descriptive norm only: own and average energy use in their neighbourhood in previous week(s) OR
  o Descriptive plus injunctive
   :) for households with less than average consumption
   :( for households with more than average consumption
  o DV: subsequent household energy consumption
   Short-term and long-term

Results
 White bars were doing well at the beginning, grey bars were doing bad at the beginning (in terms of energy consumption)
 Descriptive grey group showed a significant energy decrease
 But descriptive PLUS injunctive grey group showed an even greater energy decrease
 HOWEVER there is no significant difference between the two grey groups, meaning that the injunction (sad face) didn’t result in a greater decrease of energy consumption than just the descriptive norm alone
 Those in the white group showed a significant increase in energy consumption compared to baseline (this is a boomerang effect)
 UNLESS it is combined with an injunctive norm (the smiley face), there is no significant increase in energy use from baseline – smiley face contracts the boomerang effect

Question 3

Is nudging ethical?

Answer 3

Is it manipulative?
o Nudges must be choice-preserving (not coercive)
o Nudges should be transparent and open for public debate
 Policy makers shouldn’t be doing this under the hood, citizens should be aware that they are doing this
 And should be open to public debate

Philosophy of libertarian paternalism
o Freedom of choice, while steering people in a particular direction