Using rewards and penalties to promote sustainability: Who chooses incentive-based electricity products and why?

Incentives, both rewards and punishments, are effective instruments that have been embedded in electricity product designs to reduce electricity consumption. Reducing electricity consumption can considerably contribute to climate change mitigation. To better understand consumer preferences for incentive-based electricity products, a choice experiment using choice-based conjoint analysis was conducted among a representative sample of Swiss electricity consumers. Based on stated preferences for different product attributes, four consumer segments were identified. While two segments (49.6%) stated preference for incentive-based products, two other segments were less accepting of incentive components (particularly of penalties). We further explain the segments' preferences using psychographic characteristics, combining measures from psychology and behavioral economics. Precisely, environmental values and emotions, energy saving intentions and motives, perceived product attractiveness, as well as loss and risk aversion, and comparative optimism bias best described the segments. We align our findings with previous segmentation studies and argue for a stronger integration of behavioral economics in the environmental discourse. We further discuss the usefulness of consumer segmentation to develop tailored strategies that effectively target consumers' preferences and needs.

Automated summary

Incentives, both rewards and punishments, are effective tools embedded in electricity product designs to reduce consumption. A study conducted among Swiss electricity consumers revealed that most prefer incentive-based products, while some are less accepting of incentive components. The study also found that consumer preferences for product attributes are influenced by psychographic characteristics such as environmental values, emotions, and energy saving intentions.