Utilities Turn to Peer Pressure to Nudge Customers

Would you be more likely to rein in your energy use if you knew it would save money, or if you knew your neighbors used less? Traditional economists assume the former—that consumers do what is in their best interest—but companies are ditching that notion in favor of behavioral economics, with tangible returns, the Wall Street Journal reports. When the Sacramento Municipal Utility district, for example, recently began telling customers how their energy use compared to their neighbors, consumption fell 2%.

“Taking a behavioral approach completely changes the way you view the consumer,” says one economics professor. Though marketers have long looked for non-economic ways to motivate consumers, businesses are now approaching the topic more scientifically; the Sacramento experiment was based on a psychology study that showed consumers were more likely to cut consumption to keep up with the Joneses than to save money. (More behavioral ecnonomics stories.)