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Time-varying pricing may increase total electricity consumption: Evidence from Costa Rica

with Francisco Alpízar, Róger Madrigal-Ballestero, and Subhrendu Pattanayak

Resubmitted to Resource and Energy Economics [ pdf ] [ code ]

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We study the implementation of a time-varying pricing (TVP) program by a major electricity utility in Costa Rica. Because of particular features of the data, we use recently developed understanding of the two-way fixed effects differences-in-differences estimator along with event-study specifications to interpret our results. Similar to previous research, we find that the program reduces consumption during peak-hours. However, in contrast with previous research, we find that the program increases total consumption. With a stylized economic model, we show how these seemingly conflicted results may not be at odds. The key element of the model is that previous research used data from rich countries, in which the use of heating and cooling devices drives electricity consumption, but we use data from a tropical middle-income country, where very few households have heating or cooling devices. Since there is not much room for technological changes (which might reduce consumption at all times), behavioral changes to reduce consumption during peak hours are not enough to offset the increased consumption during off-peak hours (when electricity is cheaper). Our results serve as a cautionary piece of evidence for policy makers interested in reducing consumption during peak hours—the goal can potentially be achieved with TVP, but the cost is increased total consumption.

JEL codes: Q41, Q47, Q50

Keywords: dynamic pricing, energy, behavioral adjustments, developing country

Aspatial and spatial policies in artisanal fisheries

with Jo Albers, Madison Ashworth, Róger Madrigal-Ballestero, and Louis Preonas

Resubmitted to (2nd round) at Marine Resource Economics

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Using a spatially-explicit framework that reflects low/middle income country (LMIC) coastal characteristics, we explore how marine protected areas (MPAs) in aspatial policy settings achieve an ecological goal – avoided stock loss – and an economic goal – community income. The LMIC representation includes villagers allocating labor between fishing and onshore work, fishing site choice with distance costs, an open-access setting, and budget-constrained managers with incomplete enforcement of no-take MPAs. MPAs cannot resolve all of the marinescape’s open-access issues but create win-win opportunities for ecological and economic goals at lower levels of enforcement and tradeoffs at higher levels of enforcement. Aspatial policies – taxes, license restrictions, gear restrictions, and livelihood programs – have a spatial impact and improve the MPA’s ability to generate ecological gains, while licenses and livelihood policies mitigate MPA-induced income burdens. We find further insights for conservation-development policy in coastal settings by applying this framework to stylized examples in Costa Rica and Tanzania.

JEL codes: Q56, Q57, Q22, Q13

Keywords: no-take zones, people – park conflict, marine reserves, marine protected areas, spatial prioritization, spatial bio-economic model, fishery management, artisanal fishery

Expecting to get it: An endowment effect for information

with Linda Thunström, Klaas van ‘t Veld, and Jonas Nordström

[ pdf ] [ data and code ]

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In this paper we predict and find evidence for an "endowment effect for information"—a tendency to value information more if getting the information is expected than if it is not expected. We show that the two leading theories of expectations-based reference-dependent preferences imply such an endowment effect, and find evidence supporting this prediction in an experiment that manipulates participants’ expectations. The effect implies that the net benefits from information policies may vary with people’s expectations: consumers who regularly see information about the calories in their food, the energy use of their appliances, or the carbon footprint of their flights may come to expect access to such information and then end up valuing it more.

JEL codes: D01, D80, D83, D84, D91, C91

Keywords: expectations, reference-dependent preferences, preferences for information, information avoidance, endowment effect, welfare analysis.

Make it count: Increasing calorie information uptake

with Jonas Nordström, Jason Shogren, Linda Thunström, and Klaas van ‘t Veld

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Most of us eat too much and we end up bearing a substantial cost due to related health issues such as overweight and obesity. In response, policy makers often mandate the provision of information calories with the hope that the policy will lead to better choices and consequent improved health outcomes. However, the empirical evidence so far suggests that provision of information has, at best, a very modest effect on health outcomes. In this paper we study the extent to which information avoidance might be responsible for the lack of effectiveness of information policies and propose interventions to decrease information avoidance. In a laboratory experiment with 800 participants we find that around 70% of participants prefer to choose their meal from a menu with calorie information rather than a menu without calorie information. Furthermore, we show that we can reduce the behavioral biases driving information avoidance with simple messages, and these interventions lead to reductions in information avoidance. We replicate the experiment with 600 gig workers on MTurk and find similar results. Our findings provide clear guidance for the design of policies to increase calorie information uptake in the field.

JEL codes: D04, D60, D80, D91, C91

Keywords: nudges, welfare, information, information avoidance, calorie labels, food

Siting Marine Protected Areas with Area Targets: Protecting Rural Incomes, Fish Stocks, and Turtles in Costa Rica

with Jo Albers, Benjamin White, and Róger Madrigal-Ballestero

Environment for Development Discussion Paper Series, 2020 [ pdf ]

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With many countries seeking to increase the area conserved in marine protected areas (MPAs) to achieve the Convention on Biodiversity’s protected area targets by 2020, we employ a bioeconomic model to determine which configurations of MPAs that meet area targets perform the best for secondary goals, including fishing yield, rural income, fish stocks, and sea turtle conservation. Motivated by observations in the northern Caribbean coast of Costa Rica, the paper models the reactions of fishers to various MPA policies and the impact of policies on income and yield in two different communities, in addition to the impact on fish stock and turtle populations. This region’s tourism relies on wildlife observation, including sea turtle nesting, which links MPA conservation outcomes to on-shore wage opportunities such as turtle tour guides, but fishing activities can disrupt turtle reproduction. With artisanal fishers allocating time between fishing, traveling to fishing locations, and on-shore wage opportunities, the framework provides information about how the configuration of the MPA that achieves a target amount of MPA area affects turtle conservation and differentially affects two artisanal villages’ fishers. Overall, this analysis moves beyond achieving area targets to determine how different MPA configurations affect subsets of fishers, fish stocks, and turtle conservation.

JEL codes: Q20

Keywords: marine protected areas, fish stocks, turtles, Costa Rica