Curbing energy consumption through voluntary quotas: experimental evidence

Nicola Campigotto (University of Pisa)
Marco Catola (Maastricht University)
Simone D'Alessandro (University of Pisa)
Pietro Guarnieri (University of Pisa)
Lorenzo Spadoni (University of Cassino and Southern Lazio)

Abstract

This paper studies experimentally the use of voluntary consumption quotas as a strategy to deal with energy supply shortages. We run an online experiment in which subjects played a two-round Nash demand game that captures key features of electricity consumption decisions. Subjects were given a production task and decided independently how much energy to demand to carry the task out. Higher energy use resulted in more production and a higher payoff. However, if the sum of individual demands exceeded energy supply, then subjects suffered a power outage and produced nothing. We tested three treatments, each featuring a different voluntary quota scheme that trades-off energy consumption for security. Subjects who accepted the quota willingly limited their maximum possible consumption of energy in exchange for the guarantee that they would not suffer from outages. We show that voluntary quotas can significantly contribute to reducing grid stress, and we discuss which type of quota is best in terms of their ability to curb energy consumption and their impact on inequality in energy use.

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