Discounting the environment: The negative impact of price
Transcript of Discounting the environment: The negative impact of price
Discounting the environment: The negative impact of price discounts
on pro-environmental behavior
Daniel Schwartz George Loewenstein
Carnegie Mellon University
Behavior, Energy and Climate Change Conference - December, 2011
Discounting the Environment - Daniel Schwartz
Compact Fluorescent Light Bulb (CFL)
Discounting the Environment - Daniel Schwartz
The “Light bulb puzzle” • Energy savings and economic benefits of CFL’s ▫ Payback in less than one year (e.g. Bertoldi and Atanasiu, 2006)
▫ Alternative of incandescent light bulbs (IL’s)
• But: low adoption rate (Di Maria, Ferreira, and Lazarova, 2008; Mills and Schleich, 2008; IEA, 2006)
Discounting the Environment - Daniel Schwartz
Monetary incentives and non-price factors
• Price discounts or rebates • Non-price factors?
Discounting the Environment - Daniel Schwartz
Monetary incentives • Standard economic tool to incentivize specific behaviors
• Some limitations…
10% off
Discounting the Environment - Daniel Schwartz
Monetary incentives – limitations… • The French wanted to exterminate a rat plague in Hanoi. • They started to pay for each dead rat
• Encouraged rat breeding! (Vann, 2003)
Discounting the Environment - Daniel Schwartz
Monetary incentives – limitations… • A daycare had a problem with parents picking up their kids
after the closing time • They introduced a fine for a delay
• Delays increased! …parents were now paying for late pickups (Gnezzy and Rustichini, 2002)
Discounting the Environment - Daniel Schwartz
CFLs…Non-price potential solutions • Price-sensitivity is diluted by non-price factors (Wilms & Mills,
1995)
▫ e.g., awareness of benefits, including environment
• Social pressure (Herberich, List & Price, 2011)
• Environmental awareness and education (Di Maria et al., 2010)
Discounting the Environment - Daniel Schwartz
Questions
Are price discounts effective? Is there an effective non-price factor (e.g. eco-
friendly) to encourage CFLs purchase? self-labeling technique
Do price discounts negatively interact with this
non-price factor?
Theoretical framework
Discounting the Environment - Daniel Schwartz
Theoretical framework (1) • Negative effect of adding financial benefits on altruistic
behavior ▫ Frey and Oberholzer-Gee (1997): No reward: 50.8% in favor of placing a nuclear waste repository Reward: 24.6%
▫ Even for tasks with inherent extrinsic motivation (Schwartz, Bruine de Bruin, Fischhoff, and Lave, 2011)
• Rewards spoil reputational value of good deeds by creating
(self) doubt as the real motivation (Bénabou and Tirole, 2006)
Discounting the Environment - Daniel Schwartz
Theoretical framework (2) • Altruistic behavior can be enhanced by labeling people’s
reputational values. (Allen, 1982; Bem, 1972; Cornelissen et al., 2007).
• Self-labeling technique ▫ People seek to maintain a positive image in terms of their self-
concept (self-signaling)
“You are green”
“Am I the type of person who usually chooses the
pro-environmental product?”
Discounting the Environment - Daniel Schwartz
Overview of studies • Add discounts
• Label participants about their pro-environmental values
• Examine whether price discounts have a backfiring effect ▫ Undermine people’s self-perception of being ‘green’.
15% OFF
This product is for
GREEN SHOPPERS
Study 1Experimental design Results
Discounting the Environment - Daniel Schwartz
Experimental design • Participants had to
hypothetically buy one product .
• 2 (Label vs. No Label) x 4 (discounts on products) between-subjects design: ▫ Green label ▫ Discounts: No discounts 5% on CFL 15% on CFL 5% on IL
N = 889 (mTurk; Mage = 34)
Discounting the Environment - Daniel Schwartz
Results (1)
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No discounts 5% on CFL 15% on CFL 5% on incandescent
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Label No Label
Discounting the Environment - Daniel Schwartz
Results (2)
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No discounts 5% on CFL 15% on CFL 5% on incandescent
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Discounting the Environment - Daniel Schwartz
Results (3)
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Label No Label
Discounting the Environment - Daniel Schwartz
Results (4)
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No discounts 5% on CFL 15% on CFL 5% on incandescent
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Label No Label
Study 2Experimental design Results
Discounting the Environment - Daniel Schwartz
Passersby were invited to answer an online survey about Pittsburgh
$5-coupon to be used as compensation in an online store
Recruitment • A mobile research lab parked in a commercial area • Lab located next to a food court of a commercial building
N = 449 (Mage = 39)
Discounting the Environment - Daniel Schwartz
Experimental design • Access to online store that offered light bulbs and other
products ▫ More cash buying IL’s ▫ Other products were more expensive
• 2x2 between-subjects factorial design (‘green label’ x ‘discount’) ▫ green label ▫ 15% discount on the CFL
Discounting the Environment - Daniel Schwartz
Experimental design (cont’d) • Some questions • Product and unspent money
Discounting the Environment - Daniel Schwartz
Results (2)
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No discount Discount
% C
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LabelNo Label
This product is for
GREEN SHOPPERS
Discounting the Environment - Daniel Schwartz
Results (3)
30%
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No discount Discount
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LabelNo Label
15% OFF
Discounting the Environment - Daniel Schwartz
Results (4)
30%
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No discount Discount
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LabelNo Label
This product is for
GREEN SHOPPERS
15% OFF
Discounting the Environment - Daniel Schwartz
CFL survey 27
Variable Stats Why NOT buy CFLs (and have heard about them)
More expensive Lower quality Mercury Don’t want to change incandescents Don’t like light quality Other (e.g. time to warm up)
43.8% 8.0%
21.4% 6.9%
20.7% 19.2%
Why buy CFLs (and have bought them) Save money Protect the environment Other (e.g. last longer)
54.2% 68.7% 7.8%
Conclusions and discussion
Discounting the Environment - Daniel Schwartz
Conclusions • Adding the ‘green label’ promoted CFLs’ purchase (study 1
and 2).
• The discount on incandescent light bulbs didn’t work as a signaling mechanism to promote CFL’s purchase (study 1).
• Discounts were detrimental (study 1) or ineffective (study 2) when the ‘green label’ wasn’t included. ▫ The CFL without the ‘green label’ may not have produced the
environmental values to create self-doubts
Discounting the Environment - Daniel Schwartz
Conclusions (cont’d) • Discounts on CFLs had a detrimental effect (study 1 and 2)
when we made salient that the product was for green shoppers.
• Discounts ‘interfere’ with people’s self-signaling of pro-environmental values (specially in study 2). ▫ This effect may not apply to people who typically have no need for
CFLs (or stronger intervention to induce self-doubts is needed) Consistent with Di Maria, Ferreira, and Lazarova (2008)
Discounting the Environment - Daniel Schwartz
Discussion
• Limitations ▫ Size of discount ▫ People that don’t care about the environment ▫ Population differences (e.g. Sweden vs. U.S. ; high vs. low
income households)
• Future work ▫ Underlying mechanism: self-signaling ▫ Higher prices on green products ▫ Other products
People who don’t care about the environment buy incandescent light bulbs