11/8/10WNE - Introduction to Economics Economic Incentive and Disincentives “The Secret to Turning Consumers Green” It isn’t financial incentives. It isn’t more information. It’s guilt.

Incentives  A factor which enables of motivates a given course of action (financial or non-financial) Categories  Financial – material reward  Moral – “right thing to do”  Coercive – failure to do so would result in punishment  Social – social norms 11/8/10WNE - Introduction to Economics

“Going Green” incentives Financial - Washington D.C. imposed 5% tax on plastic bags from stores Social – Customers must ask for bags in front of other customers Results – Reduced bags from 68m to 11m 11/8/10WNE - Introduction to Economics

Changes to demand curve 11/8/10WNE - Introduction to Economics

“Telltale Towels”  A study conducted on effectiveness of reusing towels in hotels  Place cards in room urging customer to reuse towels  Two Types of incentives used  Moral “Help save the environment” or “Show your respect for nature”  Social “Join your fellow guests in helping to Save the Environment”  Results: Social proved 25% more likely to reuse 11/8/10WNE - Introduction to Economics

“Influence without boarders”  Further studies have shown that social incentives prove effective outside of US  Examples  Chinese adopting environmentally practices upon hear about neighbors  Publishing list of worst polluting paper companies was followed by dramatic improvements 11/8/10WNE - Introduction to Economics

Social incentives  Are most effective on things which are easily identified  Shopping bags  Inefficient vehicles  Difficult to create social norms on “going green” because it is invisible  Conserving water, electricity  Efficient houses etc 11/8/10WNE - Introduction to Economics

Thank you!  Any Questions? 11/8/10WNE - Introduction to Economics