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The Economic Value of Habits in Household Production – A Field Experiment

Author

Listed:
  • Ioana Bejan

    (Department of Food and Resource Economics, University of Copenhagen)

  • Carsten Lynge Jensen

    (Department of Food and Resource Economics, University of Copenhagen)

  • Laura M. Andersen

    (Department of Food and Resource Economics, University of Copenhagen)

  • Lars Gårn Hansen

    (Department of Food and Resource Economics, University of Copenhagen)

Abstract

People are prone to habits but how important are they for economic outcomes? In a randomized field experiment we compare two treatments with identical economic incentives to adjust a range of household production activities. Treatments only differ in the extent to which they allow households to adjust habits relevant for these activities. We utilize smart-metered hourly power consumption to unobtrusively measure treatment effects. We find that preventing habits from being adjusted reduces consumer surplus by 76% suggesting a substantial economic value of habits.

Suggested Citation

  • Ioana Bejan & Carsten Lynge Jensen & Laura M. Andersen & Lars Gårn Hansen, 2018. "The Economic Value of Habits in Household Production – A Field Experiment," IFRO Working Paper 2018/01, University of Copenhagen, Department of Food and Resource Economics.
    • Handle: RePEc:foi:wpaper:2018_01
    as

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    File URL: http://okonomi.foi.dk/workingpapers/WPpdf/WP2018/IFRO_WP_2018_01.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    habits; field experiment; household behavior; text messages; electricity use;
    All these keywords.

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General

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