27 Oct
2022
Curbing energy consumption through voluntary quotas: Experimental evidence
This paper studies experimentally the use of voluntary consumption quotas as a strategy to deal with energy shortages. We run an online experiment where subjects play a two-round Nash demand game that captures key features of electricity consumption decisions. Each player is assigned to a group of 10 players. In round 1 the total energy pool is 100 while in round 2 there is a 50% probability that the pool is halved. Players can choose to play the game or accept a quota policy that will guarantee them a given payoff per round. We test 3 different policies. The first guarantees a fixed payment of 5 while the others a fixed share of either 10% or 6% of the pool. Our results show that in the baseline treatment players usually over-extract leading to energy shortages. Moreover, in case of power cuts, players adjust their demand downwards but less than the decrease in the pool. When quota policies are offered, the majority of players accept them. However, the fixed payment has a significantly lower acceptance rate while the 10% is the most accepted. Finally, we simulate 20000 groups per treatment to check the effectiveness of quotas in reducing over-extractions. While in the baseline the outage rate is close to 100% in each round, every quota is effective in reducing the shortages. In this case, the 6% policy is the most effective in every round.