Unraveling Heat

Last registered on October 07, 2024

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Pre-Trial

Trial Information

General Information

Title

Unraveling Heat

RCT ID

AEARCTR-0014347

Initial registration date

September 23, 2024

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published

October 07, 2024, 6:46 PM EDT

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Locations

Country

Switzerland

Region

Primary Investigator

Name

Helena Hauser

Affiliation

University of Zurich

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Other Primary Investigator(s)

PI Name

Steve Cicala

PI Affiliation

Tufts University

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PI Name

Morten Olsen

PI Affiliation

University of Copenhagen

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PI Name

Harald Mayr

PI Affiliation

University of Zurich

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PI Name

David Hémous

PI Affiliation

University of Zurich

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Additional Trial Information

Status

In development

Start date

2024-09-24

End date

2024-12-31

Keywords

Behavior, Environment & Energy

Additional Keywords

Adverse selection, Submetering, Residential Energy Consumption, Regulatory Economics, Political Economy

JEL code(s)

Secondary IDs

Prior work

This trial is based on or builds upon one or more prior RCTs.

Abstract

This study examines the use of adverse selection as a policy tool for taxing negative externalities through voluntary certification. Individuals or firms can choose to reveal their externality level and be taxed accordingly, rather than based on the average for non-certified parties. Parties with below-average externalities benefit from certification, and their choosing the individual taxation raises the tax for the non-certified parties. As the average tax for non-certified parties increases, more individuals are incentivized to opt for certification. Economic theory predicts that this process of separation will continue, and terms this phenomenon as unraveling.
We apply this concept to heat consumption in Switzerland, where residential buildings often lack individual meters. Heating costs are typically allocated based on apartment size, but optional sub-metering could enable billing by actual usage. We test whether offering tenants the option of individual heat bills reduces opposition to sub-metering, even when the theoretical prediction of unraveling is explained.

External Link(s)

Registration Citation

Citation

Cicala, Steve et al. 2024. "Unraveling Heat." AEA RCT Registry. October 07. https://doi.org/10.1257/rct.14347-1.0

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Experimental Details

Interventions

Intervention(s)

Intervention (Hidden)

We employ a 2x2 factorial design, with 25% probability for each cell. Randomization is not stratified. As an information treatment, a third video is shown to 50% of participants, explaining the economic prediction of unraveling. The estimated additional cost of individual bills (e.g., for the installation and maintenance of meters, and billing services) are randomized to CHF 75 or CHF 100.

Intervention Start Date

2024-09-24

Intervention End Date

2024-12-31

Primary Outcomes

Primary Outcomes (end points)

Opposition to mandatory consumption-based bills vs keeping shared bills,
Opposition to voluntary consumption-based bills vs keeping shared bills.

Primary Outcomes (explanation)

Preferences between the billing methods are elicited in a vote: "If you had the choice between the shared bill or the consumption-based bill, which one would you prefer?". Answer options are on a 5-point Likert scale: "Strongly prefer the shared bill, Prefer the shared bill, Indifferent, Prefer the [mandatory / voluntary] consumption-based bill, Strongly prefer the [mandatory / voluntary] consumption-based bill.
Opposition is defined as a dummy variable that takes the value 1 if "Strongly prefer the shared bill" or "Prefer the shared bill" has been selected, and 0 else.

Secondary Outcomes

Secondary Outcomes (end points)

Preference between mandatory or voluntary consumption-based bills,
Expected share of neighbors choosing the individual bill under the voluntary policy,
Pre-treatment understanding of unraveling,
Predicted changes in heat consumption with the mandatory switch to individual bills,
Fairness of the different bills,
Environmental concern.

Secondary Outcomes (explanation)

Experimental Design

This experiment examines how people prefer to distribute the costs of a good they consume individually but are billed for as part of a group. Participants choose between two options: paying for their individual consumption or sharing the costs with the group. The experiment compares mandatory versus voluntary adoption of the individual option. It randomly varies the cost of the individual option and an information treatment.

Experimental Design Details

This study surveys residential tenants of a Swiss real estate company, where heating costs are allocated based on apartment size (shared bill) rather than consumption (individual bill). Participants, unaware of their actual heat usage, receive an estimate of their consumption relative to the Swiss average. Two videos explain first the two billing methods (shared or individual) and then the voluntary switch to individual bills. A 2x2 factorial design is used, with random assignment to conditions. Half of the participants are shown a third video explaining the economic prediction of unraveling. The estimated cost of switching to individual billing is randomized at CHF 75 or CHF 100.

Randomization Method

Randomization done by Qualtrics.

Randomization Unit

Individual

Was the treatment clustered?