Peer comparisons and the cost of pro-social behavior: Evidence from the lab

Abstract

Behavioral nudges in the form of peer-comparison information have, in many cases, proven effective in promoting pro-social behavior. The most prominent example is the use of home energy reports in electricity markets. While there is evidence that peer comparisons can induce reductions in externality-generating consumption, it is not clear through which channels the nudges operate. One possible channel is pecuniary: peer comparisons may make consumption choices more salient and prompt discovery of opportunities for financial savings. The other is non-pecuniary: peer comparisons may trigger moral motives such as guilt, social conformism, or social competitiveness. This study uses a controlled posted-price market experiment with externalities. We eliminate the “discovery” channel present in field settings by making financial incentives fixed and known. The experiment thus controls the pecuniary channel, leaving only the non-pecuniary, “moral” channel. We find that the nudge still enhances pro-social behavior, pointing to the moral channel’s importance. Two additional findings are that the nudge is equally effective across the treatments with low and high market prices (indicating that nudges and financial incentives neither complement nor crowd each other out) and that the nudge is more effective for participants with relatively cooperative worldviews.