Date – Autumn-Winter 2017
Client – Castaic Lake Water Authority
Industry – Water Utility Management
Problem – Water scarcity is a major global public policy problem, and particularly so in California (where Castaic Lake is located). Water suppliers generally face the challenge of meeting growing demand in the face of limited supply. In typical markets, supply-demand imbalances are addressed through price adjustments. However, most water suppliers have limited flexibility to raise prices in times of shortage. This means that other solutions have to be found.
Solution – Our decisions are affected by cognitive biases and heuristics. This creates
opportunities for small changes in the framing and provision of information, as well as
in the design of incentives, to have large positive effects. With this in mind, we are running an experiment that tests whether two behavioral interventions – one that leverages social norms and one that uses loss aversion – might improve take-up of lawn replacements and reduce water consumption.
Randomised experiments are the gold standard in economics research. This experiment will, with a high degree of certainty, reveal the relative effectiveness of the two interventions and determine whether they are improvements upon status quo. We will also investigate how the interventions work, as well as whether the impact varies with demographic and environmental conditions.