Economic
Incentive and
Disincentives
“The Secret to Turning Consumers Green”
It isn’t financial
incentives. It isn’t more
information. It’s guilt.
WNE - Introduction to Economics
11/8/10
Incentives

A factor which enables of motivates a given
course of action (financial or non-financial)
Categories
WNE - Introduction to Economics

Financial – material reward

Moral – “right thing to do”

Coercive – failure to do so would result in
punishment

Social – social norms
11/8/10
“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
WNE - Introduction to Economics
11/8/10
Changes to demand curve
WNE - Introduction to Economics
11/8/10
“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

WNE - Introduction to Economics
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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
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“Influence without boarders”
WNE - Introduction to Economics
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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
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Social incentives

Are most effective on things which are easily
identified



Inefficient vehicles
Difficult to create social norms on “going
green” because it is invisible


WNE - Introduction to Economics
Shopping bags
Conserving water, electricity
Efficient houses etc
11/8/10
Thank you!

WNE - Introduction to Economics
Any Questions?
11/8/10