Nudge and tax in an environmental public goods experiment: Does environmental sensitivity matter?

Abstract

An experiment is proposed in which the subjects could contribute to a public good which could be thought of as reducing pollution, which was stochastic. A nudge (announcement of the socially optimal contribution) and a tax are implemented to improve the level of contributions. The environmental sensitivity and optimism of the subjects are also elicited. Our first result shows that the implementation of the nudge does not perform as well as the implementation of the tax. The reaction to the nudge depends directly on individuals’ environmental sensitivity, contrary to the reaction to the tax. Secondly, the nudge performs well with highly sensitive subjects only during the first half of its implementation. Lastly, the efficiency analysis shows that the implementation of the nudge significantly decreases the groups’ welfare for the least sensitive subjects, in comparison to the baseline.

Keywords

Reference

Kene Boun My, and Benjamin Ouvrard, “Nudge and tax in an environmental public goods experiment: Does environmental sensitivity matter?”, Resource and Energy Economics, vol. 55, February 2019, pp. 24–48.