Green defaults - Max-Planck-Institut für Bildungsforschung

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5þ model
Abstract
Journal of Environmental Psychology ] (]]]]) ]]]–]]]
Green defaults: Information presentation and pro-environmental
behaviour
Daniel Pichert a, , Konstantinos V. Katsikopoulos a,b
a Max Planck Institute for Human Development, Lentzeallee 94, 14195 Berlin, Germany
b Massachusetts Institute of Technology, Cambridge, MA, USA
There is inconsistency in many people’s choice of electricity. When asked, they say they prefer a ‘green’ (i.e., environmentally friendly)
source for this energy. Yet, although green electricity is available in many markets, people do not generally buy it. Why not? Motivated
by behavioural decision research, we argue that the format of information presentation drastically affects the choice of electricity.
Specifically, we hypothesise that people use the kind of electricity that is offered to them as the default. We present two natural studies
and two experiments in the laboratory that support this hypothesis. In the two real-world situations, there was a green default, and most
people used it. In the first laboratory experiment, more participants chose the green utility when it was the default than when ‘grey’
electricity was the default. In the second laboratory experiment, participants asked for more money to give up green electricity than they
were willing to pay for it. We argue that changing defaults can be used to promote pro-environmental behaviour. Potential policymaking
applications of this work are discussed.
r 2007 Elsevier Ltd. All rights reserved.
Keywords: Decision research; Policy making; Pro-environmental behaviour; Defaults; Energy
1. Introduction
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The way we currently use energy is not sustainable. First,
we are heavily reliant on fossil fuels—such as oil, coal, and
gas—that will one day be depleted (Roberts, 2005). Second,
and perhaps even more importantly, the burning of fossil
fuels is the biggest source of emissions of carbon dioxide,
one of the greenhouse gases that contribute to global
warming. Already fuel prices and temperature have been
rising. Furthermore, the International Energy Agency
(IEA) predicts that the global hunger for energy is likely
to grow in the future (Organisation for Economic Cooperation
and Development/International Energy Agency,
2006). The goal of reducing greenhouse gas emissions, as
formulated in the 1997 Kyoto Protocol, seems hard to
UNCORRECTED PROOF
meet: Developing countries are rapidly approaching the
levels of consumption found in Western countries and
emissions are still growing (albeit at a slower rate) in the
more industrialised nations. The IEA has called for strong
Corresponding author. Tel.: +49 30 82406 416; fax: +49 30 82406 394.
E-mail address: danipu@gmx.de (D. Pichert).
0272-4944/$ - see front matter r 2007 Elsevier Ltd. All rights reserved.
doi:10.1016/j.jenvp.2007.09.004
ED:G:JayaL:
PAGN:Anvar SCAN:
ARTICLE IN PRESS
www.elsevier.com/locate/jep
and coordinated government action (Organisation for
Economic Co-operation and Development/International
Energy Agency, 2006).
The goal of those policies would presumably be to
facilitate the switch to using renewable energy sources such
as water, wind, biomass, and the sun. The European
Commission, for example, is promoting renewable energy
with a broad mix of measures ranging from tax policy to
research and development. 1 The objective is to induce
changes in human behaviour (Gardner & Stern, 2002;
Nickerson, 2003). Since the start of the liberalisation of
European energy markets several years ago, most European
consumers of electricity now have the ‘‘power to
choose’’. This is the title of the official European Union
information brochure, 2 which tells consumers that ‘‘ybecause
your supplier now has to indicate the source of their
1 See the European Commission’s White Paper on Renewable Energy
Sources (1997) or the Directive on the Promotion of Electricity from
Renewable Energy Sources (2001), available at http://ec.europa.eu/energy.
2 Brochure on the Internal Energy Market, available at http://
ec.europa.eu/energy/gas/publications/index_en.htm.
Please cite this article as: Pichert, D., & Katsikopoulos, K. V. Green defaults: Information presentation and pro-environmental.... Journal of
Environmental Psychology (2007), doi:10.1016/j.jenvp.2007.09.004
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2
bills, you can choose the most environmentally friendly
supplier.’’
Consumers can purchase this so-called ‘green’ electricity
by choosing a green tariff, participating in a green
electricity programme, or contracting with a utility
specialised in trading green electricity (Bird, Wu¨ stenhagen,
& Aabakken, 2002). Choice of carrier, including the
possibility to buy green electricity, has been established in
the United Kingdom, a number of US states, Germany
(where this study takes place), and a number of other
countries (Bird et al., 2002; Clark, Kotchen, & Moore,
2003). By means of labelling and information disclosure,
consumers are now able to know how the electricity they
use is produced (Roe, Teisl, Rong, & Levy, 2001; Truffer,
Markard, & Wu¨ stenhagen, 2001). Note that buying green
electricity does not make a difference in the actual
household electricity supply, but rather in investment
flows. The idea is that increasing demand for green power
will result in fewer conventional fuels and more environmentally
benign energy sources being used.
Have these efforts brought results? In theory, yes:
Opinion polls and market analyses in the United States,
the United Kingdom, and other European countries show
strong public support for green energy (Farhar, 1999;
Laboratory for Energy and the Environment, 2005; MORI,
1996; Roe, Teisl, Levy, & Russell, 2001). Typically 50–90%
of those asked say that they favour renewable energy and
are willing to pay at least a small premium to have it. But,
unfortunately, these statements do not reflect behaviour.
The percentage of people who consume green electricity is
marginal in nearly all countries, for example, 1% in
Ireland, .4% in Finland, 1% in Germany, 2% in Switzerland,
and .5% in the United Kingdom (Bird et al., 2002).
In short, when asked, people prefer green electricity. This
kind of electricity is available in the market, but people do
not buy it. Instead, most of us rely on ‘grey’ electricity, that
is, electricity generated from detrimental or at least
controversial energy sources such as coal or atomic power.
Why is this?
To answer a question about human behaviour, one needs
to use methods from the social sciences such as economics
and psychology (Brewer & Stern, 2005). A number of
researchers have done this. Rowlands, Parker, and Scott
(2004) investigated how socio-demographic characteristics
and awareness about energy issues affect the intention to
switch to a green electricity utility. Clark et al. (2003) made
a contribution in two ways. First, they considered
observed, not intended, behaviour and separately studied
UNCORRECTED PROOF
participants and non-participants in a green electricity
programme in the state of Michigan. Second, in addition to
socio-economic and demographic variables, Clark et al.
(2003) considered the effects of variables measuring
altruistic and environmental attitudes. They found that
all variables had a significant effect on the decision to
participate. Bamberg (2003) followed up on the point of
exactly how environmental concerns affect behaviour. He
found that environmental concern affects the perception
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and evaluation of information about green electricity
utilities but does not affect the decision to request this
information.
In other words, previous research on why people do not
buy green electricity even though they say they prefer it
looked at personal factors, such as an individual’s income
and attitudes about the natural environment. Here we take
a different approach that looks at those things in a person’s
psychological environment that influence a decision to use
green electricity. 3 Much can be understood about a
person’s decision making when the psychological environment
is studied, if only because it tends to be easier to
observe and to measure its characteristics accurately than
internal traits and attitudes. This approach has been used
successfully to analyse a number of decision situations,
including one similar (in the sense that the psychological
environment has a considerable influence on the making of
the decision) to that of choosing green electricity—the
decision of whether to purchase an over-the-counter pain
reliever (Hanoch, Katsikopoulos, Gummerum, & Brass, in
press).
A major characteristic of the psychological environment
is the format in which information is presented (Gigerenzer
& Hoffrage, 1995). In the choice of a utility, grey and green
electricity are typically presented in a very specific format:
Grey electricity is the default option (it is obtained when
the customer does nothing), whereas green electricity is an
alternative option (to obtain it, the customer needs to
switch). For example, the German electricity market was
opened in 1998. But there was never a tabula rasa during
the liberalisation, that is, a starting point where consumers
actively had to choose between utilities. Instead, consumers
continued to be supplied by their incumbent utility. Even
people moving into a new flat would automatically become
customers of the incumbent utility by turning on a light,
thereby agreeing to a ‘silent’ contract. This incumbent
utility almost always provided grey electricity.
Based on the literature on defaults, we hypothesise that
the information presentation format greatly influences the
choice of an electricity utility. If this is true, changing the
format so that green electricity is the default may promote
pro-environmental behaviour in a more effective way than
just trying to persuade people to change. This paper
presents four studies—two ‘‘natural experiments’’ (Harrison
& List, 2004) and two laboratory experiments—that
investigate the influence of defaults on the choice of green
electricity. Before we present the experiments, we provide
some background on defaults.
2. Defaults
A default is the condition that is imposed when an
individual fails to make a decision (Johnson & Goldstein,
3 Simon (1956) used the term ‘environment’ to label this collection of
things but for the purposes of this paper we will call it psychological
environment to differentiate it from the natural one.
Please cite this article as: Pichert, D., & Katsikopoulos, K. V. Green defaults: Information presentation and pro-environmental.... Journal of
Environmental Psychology (2007), doi:10.1016/j.jenvp.2007.09.004
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2003) or the option that consumers receive if they do not
explicitly request something different (Brown & Krishna,
2004). Many decision-making studies have shown that
defaults tend to ‘stick’, that is, people do not switch to
another alternative (e.g. Anderson, 2003; Sunstein &
Thaler, 2003). Johnson and Goldstein (2003) provided a
striking illustration of the power of defaults. They showed
that consent rates for organ donation in different
European countries are largely the product of national
defaults. Some countries have an opt-in policy (one has to
register to become an organ donor) and others use an optout
policy (one is a donor unless one registers not to be a
donor). The two policies result in large differences in
consent rates. In Austria, for example, 99% of the people
are organ donors whereas in Germany the consent rate is
12%. Johnson and Goldstein (2003) argued that such
differences could not be explained by socio-economic
variables. Generally, although they are free to do so at
any time, most people simply do not change the default.
Default effects have also been found in the participation
in 401(k) retirement plans (Choi, Laibson, Madrian, &
Metrick, 2002; Madrian & Shea, 2001), in insurance
Q1 choices (Johnson, Hershey, Meszaros, & Kunreuther,
1993), in consumer research (Brown & Krishna, 2004;
Park, Youl Jun, & MacInnis, 2000; Puto, 1987), and in
Internet privacy policies (Johnson, Bellman, & Lohse,
2002). Camerer (2000, p. 295) writes: ‘‘Making one option
the status quo or default or endowing a person with a good
(even hypothetically) seems to establish a reference point
people move away from only reluctantly, or if they are paid
a large sum.’’
The influence of the default seems to be even stronger
when consumers are not so familiar with a product and
have little knowledge about it (Sunstein & Thaler, 2003).
This describes the commodity of electricity, which is an
intangible product (it is, in a real sense, difficult to grasp).
Moreover, Western citizens have been described as ‘energy
illiterates’ (Roberts, 2005). Thus, one might expect that
consumers’ preferences are constructed in the sense that
they are developed on the spot and are highly contingent
upon context and information presentation factors (Payne,
Bettmann, & Johnson, 1992; Slovic, 1995).
Why do defaults work? Explanations in the literature
often involve biases, that is, departures from what is
considered rational according to standard norms of logic
and probability (Kahneman & Tversky, 1979; Samuelson
& Zeckhauser, 1988). This kind of explanation has been
criticised because such norms can be argued to be
UNCORRECTED PROOF
irrelevant to successful behaviour in the real world (Fasolo,
McClelland, & Todd, in press; Gigerenzer, Todd, & the
ABC Research Group, 1999). Sticking to defaults can be
considered rational because it can save time, effort, and
money. Whereas accepting the default is effortless and
requires no time commitment, people intending to switch
have to search for information (e.g. on the Internet or by
asking others), choose from the possible options, and
finally act. In addition, the default may be cheaper as is the
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case with grey electricity, or transaction costs might be
charged: In an early stage of the market liberalisation,
Norwegian customers had to pay a fee in order to switch
(Nordic Energy Regulators, 2005).
There are also good reasons for sticking with the default
that do not have to do with rationality (at least in a strict
sense). For one, it does not seem unreasonable to interpret
the default as a recommendation from the policymaker,
indicating the socially desired behaviour (Johnson &
Goldstein, 2003; McKenzie, Liersch, & Finkelstein,
2006). Similarly, when a company offers a ‘standard
product’ (Brown & Krishna, 2004) as a default option,
the customer might interpret this product as the one that is
known to the company to fit most of its customers. Second,
it is generally difficult for people to perform trade-offs
(Irwin & Baron, 2001) and reconcile conflicting objectives
such as saving money and preserving the environment. This
becomes even harder when some of the objectives have a
moral connotation, as does preserving the environment.
Sticking with the default seems to allow one to bypass a
stressful and awkward decision (even though doing nothing
is also a decision). Finally, people are creatures of habit—
interestingly, the word ‘customer’ historically derives from
‘custom’, meaning ‘habit’. In a way, being a customer
already refers to the psychological attachment to a vendor
or a service.
In summary, the decision-making literature shows that
defaults have a strong influence on behaviour. There are a
number of reasons for this effect and they seem applicable
to the choice of an electricity utility. Therefore we
formulate the following Hypothesis:
Hypothesis. Defaults affect the choice of electricity. Thus,
currently, most people use grey electricity because grey
electricity is usually the default. In those cases where green
electricity is the default, most people will use green
electricity.
In the next section, we present two natural experiments
and two laboratory experiments that we used to put our
hypothesis to the test.
3. Studies
The most critical test of our hypothesis is whether people
who are subject to a green default also use green electricity.
It is difficult to find such a naturally occurring situation.
We contacted a number of power suppliers but could not
obtain relevant data. In the end, however, we succeeded in
finding two cases where a group of consumers had a green
default. In the first case, a green default was established in
a small town. In the second case, a supplier used green
electricity as a default when asking its customers to choose
between three different tariffs. In these natural experiments,
the dependent variable is the proportion of
customers choosing green electricity. We use the term
‘‘natural experiments’’ in the sense that we simply observe
naturally occurring ‘‘treatments’’ without further manip-
Please cite this article as: Pichert, D., & Katsikopoulos, K. V. Green defaults: Information presentation and pro-environmental.... Journal of
Environmental Psychology (2007), doi:10.1016/j.jenvp.2007.09.004
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ulation (Harrison & List, 2004). A problem with observations
such as these, however, is that they lack experimental
control. For this reason, we added two laboratory
experiments in which we exposed participants to hypothetical
choices under varying conditions. This also allowed us
to look into other dependent variables. We accept that
choices in the laboratory lack real consequences, but we
believe that the four studies together allow the testing of
our hypothesis.
3.1. First natural experiment: a green default in the real
world
Scho¨ nau is a picturesque little town situated in the
southern part of the Black Forest, an area that is politically
dominated by the conservatives, especially in more rural
areas. The influence of the Green Party (the German party
that is commonly associated with the promotion of proenvironmental
policies) is comparatively low: In the last
elections for the German Parliament, the Party received
approximately 5% of the ballots cast. We emphasise this to
show that the area can hardly be described as the political
centre of grass-roots environmentalism. In fact, the
opposite might be true.
About 2500 citizens inhabit Scho¨ nau. The unemployment
rate is low. A quick glance at Scho¨ nau’s website
reveals that several small clubs are engaged in the
cultivation of rustic folklore, including traditional costumes,
dances, and songs. What makes Scho¨ nau interesting
for our purposes is that in this town, green electricity is not
the alternative but the default. Here is how it happened.
In the 1980s, a citizens’ initiative was founded in
Scho¨ nau as a reaction to the Chernobyl disaster. The
objective of the group was activism against nuclear power.
Campaigns like these were not uncommon in Germany in
those days but it is remarkable that the activities of
campaigners in Scho¨ nau resulted in proposals to take over
the electricity grid in order to establish an environmentally
friendly energy supply. Needless to say, this venture caused
some conflict. Citizens had to decide if the initiative would
be allowed to manage the Scho¨ nau grid. Before the vote,
the Scho¨ nau city centre witnessed intense campaigns by
both supporters and opponents of the proposal. Finally,
the proposal was accepted by a very close margin (ca. 52%
vs. 48%, turnout ca. 90%). Even more astonishingly, in
1997, the initiative managed to raise enough funds to buy
the grid from its reluctant owner. Recall now that the
German electricity market was opened in 1998. Because the
UNCORRECTED PROOF
deal was clinched 1 year before, the EWS (i.e. the Scho¨ nau
Power Company) became the incumbent utility in Scho¨ nau
and it still is. EWS purchases mainly energy generated from
renewables from newly built facilities and promotes solar
energy. That is, EWS, also called ‘Electricity Rebels’,
stands for a truly green approach.
But as the heat surrounding the citizens’ vote shows, the
Scho¨ nau citizens were polarised with regard to the rebels’
ideas. In fact, one of the managing directors of EWS told
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us: ‘‘We were really afraid because we did not know what
would happen when the liberalisation started.’’ But those
fears were unnecessary. In 2006 (ca. 8 years after the
market opening), 1669 out of 1683 electricity meters 4 in
Scho¨ nau were still supplied with electricity traded by EWS
(data from EWS). Nearly every customer remained with
the green default. Recall that the share of those participating
in green electricity programs in other German towns,
where there is usually a grey default, is approximately 1%.
3.2. Second natural experiment: a utility-induced green
default
In the case of Scho¨ nau, switching away from the default
requires searching for information about alternative
options. In our second example, this effort is not necessary
as it is the incumbent supplier itself providing a number of
alternatives and asking their customers for a decision. The
company published the data we will present. Wu¨ stenhagen
(2000, in German) previously used these data in a
marketing analysis, but not to make the point we are
making here.
In 1999, Energiedienst GmbH, a company supplying a
grid area in southern Germany, diversified its services,
offering three new tariffs where there had previously been
only one. Letters were mailed to 150,000 private and
business customers. Interesting here is the fact that a green
(waterpower) tariff was used as the default: Customers
wishing to be supplied with the green tariff did not need to
respond. The green tariff was slightly cheaper than the
previous tariff offered by the company. The other two
options were a grey, even more economical tariff (ca. 8%
cheaper), and a more expensive green tariff (ca. 23% more
expensive, including a higher share of electricity generated
from new facilities). Customers preferring one of these two
alternative tariffs had to reply.
Two months after the request was sent, 4.3% of the
customers had decided to switch to the economical tariff,
less than 1% had switched to the premium-priced green
tariff, and .7% reacted by switching to a different supplier.
About 94% of the customers remained with the default
option.
It may be that by using a green default, the company
intended to influence customers’ behaviour in such a way
that they would choose the product the company wanted to
distribute. We do not know. Our point is that here as well
as in the Scho¨ nau natural experiment, the information
presentation format had a dramatic effect on the electricity
people used. More specifically, a green default means that
most people use green electricity.
As already mentioned, natural experiments have their
limitations. In the experiments reported here, (1) some
people simply might not have known that they could
switch, or how to do so; in this case, one cannot exactly say
4 The company’s data records cover electricity meters that are largely,
but not exactly related to the number of households or inhabitants.
Please cite this article as: Pichert, D., & Katsikopoulos, K. V. Green defaults: Information presentation and pro-environmental.... Journal of
Environmental Psychology (2007), doi:10.1016/j.jenvp.2007.09.004
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that those customers ‘‘chose’’ (although this argument
applies more to the first experiment and less to the second
one where the utility informed its customers about the
opportunity to switch). (2) In the first experiment, the
heated debate on the takeover of the grid might have had
effects of its own that are difficult to judge; it may have, for
example, made people more sensitive to the subject of
preserving the environment. (3) We do not have data about
offers from other suppliers in the two experiments, and this
prevents us from disentangling the effect of default from
that of price. (4) Related to this, both experiments looked
at regions with above-average incomes. To address these
limitations, we conducted two laboratory studies, which
allowed more control and tested additional dependent
variables.
3.3. First laboratory experiment: choices
We designed a simple decision task that confronted
people directly with the choice between different electricity
suppliers. The control we gained by using a laboratory
experiment was found in the random assignment of
participants to conditions, the use of a ‘neutral’ condition,
and the implementation of a trade-off (a more expensive
green service vs. a cheaper grey service). We also asked
participants to give reasons for their decisions. Our
prediction was that more people would choose the more
expensive green tariff when it was presented as the default
option than when it was presented as an alternative to the
lower priced grey tariff.
3.3.1. Method and procedure
Analyzing German marketing research, we found that
younger adults, in general, know that they can choose their
electricity supplier, because they are better informed,
relocate more often, and are more familiar with modern
registration procedures using the Internet. However, many
older people are still unfamiliar with the task of choosing
an electricity supplier. This is why our experimenters were
instructed to address young adults (loosely defined as
persons between the ages of 18 and 35 years). 5
We gave participants a short questionnaire that consisted
of two parts. The first part was a short vignette (see
Appendix A). Participants were asked to imagine that they
had moved to another town. In their new flat, they were
confronted with the choice between two electricity suppliers:
one advertising ‘clean electricity’ generated from
environmentally benign renewable energy sources, and
another offering a more economically priced tariff. For the
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latter option, no further information about the origin of
the electricity was given. It was meant to represent a utility
marketing grey energy (in standard electricity tariffs in
Germany, a mix of fossil fuels and nuclear power is
predominant). This design took into account the reality of
marketing, namely, that suppliers distributing grey energy
avoid discussing energy sources, for good reason; for
instance, nuclear power is extremely controversial (we were
not able to find a single utility that advertises cheap nuclear
power). On the other hand, all utilities specialising in green
energy explicitly highlight this information. A manipulation
check (see below) ensured that the participants
interpreted the descriptions in such a way that the grey
service appeared less environmentally benign than the
green one.
The information given about the two companies and
their tariffs is listed in Table 1. The prices are very close to
what a small household in Germany actually pays for
electricity per month. One of the two companies was
introduced as the incumbent utility. The other utility was
presented as a competitor that advertises its offers. To test
for default effects, we used two different versions of the
decision question. In the green condition, the green utility
served as the default, and the grey one was the competitor.
Roles were reversed in the grey condition. The prediction
was that more people would choose the green option in the
green condition.
Furthermore, we added a neutral condition. Here a
choice had to be made between the two utilities without
either of the two being the incumbent. Comparisons were
planned between the grey condition as a benchmark
(representing the usual situation in Germany) and the
green and neutral conditions.
Participants were asked to give a short statement
explaining the reasons for their decision. They also had
to rate both utilities on 7-point scales (ranging from very
negative to very positive), for both their environmental and
pricing policy. Finally, participants had to rank five
attributes (company reputation, environmental impact,
location of provider, quality of service, price) according
to their relevance for choosing an electricity supplier. The
order of the attributes was randomised across participants.
We also gathered demographic data. The completion of the
UNCORRECTED PROOF
5 The study took place in Berlin, and due to the availability of flats in
this city, it is not unusual for 18-year-olds to live in their own flat. Persons
younger than 18 have limited contractual capability in Germany.
However, there is no strong rationale for choosing the age of 35 as the
upper limit for ‘‘young adults’’, which is—in a way—arbitrary. If it is true
that older people are less familiar with the task of choosing an electricity
supplier or simply do not know that they can switch, an age effect can be
predicted. We did not address this prediction in the present study.
Table 1
Options in the first laboratory experiment
Company
name
Information given Monthly
costs
EcoEnergy EcoEnergy sells clean electricity, generated
from renewable energy sources. Contribute
to climate protection and environmental
protection!
Acon We offer low-priced electricity tariffs—you
cannot beat our prices. Save money with
Acon!
h30 (ca.
$39)
h25 (ca.
$32)
Please cite this article as: Pichert, D., & Katsikopoulos, K. V. Green defaults: Information presentation and pro-environmental.... Journal of
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questionnaire took approximately 5 min. Participants were
rewarded with a bar of chocolate.
3.3.1.1. Participants. Participants were recruited in public
places in Berlin and in the laboratory of the Max Planck
Institute for Human Development while waiting to
participate in other experiments. This resulted in a sample
of 225 participants (126 female, 99 male). Mean age was 25
years (SD ¼ 3.7). Persons younger than 18 years or older
than 35 years were removed from the sample, which
resulted in the exclusion of 8 persons. Excluding these cases
from the analysis did not affect the results.
Most of the participants were students (63%). Participants
were randomly assigned to one of the three
conditions. A power analysis was conducted before the
experiment to ensure that the selected sample size would
result in a power of at least .80 for a medium effect size at a
significance level of .05 (Cohen, 1988).
3.3.1.2. Manipulation checks. For environmental impact,
participants rated the green utility (M ¼ 4.9, SD ¼ 1.1)
better than the non-green utility (M ¼ 3.3, SD ¼ 1.1),
t(224) ¼ 14.2, p ¼ .001. The price of the grey utility
(M ¼ 4.8, SD ¼ 1.1) was considered to be better than that
of the green one (M ¼ 3.4, SD ¼ 1.0), t(224) ¼ 14.49,
p ¼ .001. Finally, for the ratings of the five attributes, price
was the most important (M ¼ 1.72, SD ¼ .9), followed by
environmental impact (M ¼ 2.53, SD ¼ 1.3), quality of
service (M ¼ 2.88, SD ¼ 1.1), company reputation
(M ¼ 3.6, SD ¼ 1.2), and local production (M ¼ 4.24,
SD ¼ 1.0).
100.00%
50.00%
0.00%
green utility
non-green utility
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3.3.2. Results
3.3.2.1. Choices. The choices of the participants are
displayed in Fig. 1. In the grey condition, 31 of 75
participants (41%) chose the green utility, whereas 52 of 77
participants (68%) in the green condition chose the green
utility. When the two options were presented in a neutral
format (neutral condition), 67% chose green. A 3 2 w 2
analysis shows that there was an overall effect of condition
on participants’ choices, w 2 (2) ¼ 13.94, p ¼ .001.
To assess which of the effects in the data are statistically
significant, two separate 2 2 w 2 tests were calculated.
Supporting our hypothesis, more participants chose the
green utility in the green condition as compared to
participants from the grey condition, w 2 (1) ¼ 10.52,
p ¼ .001, with a medium effect size (F ¼ .26). Comparing
participants’ choices in the grey and the neutral condition,
more participants chose the green utility in the neutral
condition, w 2 (1) ¼ 9.9, p ¼ .002, F ¼ .26.
3.3.2.2. Reasons. The reasons for the participants’
choices were analysed as follows. We tallied how often an
attribute (such as price or environmental impact) was
mentioned (in a positive or negative way). The most
common reasons and their frequencies are displayed in
Table 2. Two judges carried out the coding independently.
As multiple codes could be assigned to a participant’s
statement, agreement between raters was calculated for
each category separately. Interrater reliability was high
(coefficient k ranged from .72 to .94). Disagreements were
resolved by discussion.
The majority of the participants stated thoughts about
the environment, the price, or both (44%) motivated their
choice. We next wanted to analyse whether different
conditions evoke different thoughts about the issues, but
because there was high variability in the statements, we
were not able to detect systematic differences as a function
of the default. Still, some observations are interesting.
First, 15% of the participants stated that anticipated effort
(such as requesting a new contract) or laziness prevented
them from switching, a tendency supporting the default
option. Second, in the majority of cases, when distrust or
scepticism of a provider was stated, it referred to the
alternative, non-default option (17 of 19 statements;
UNCORRECTED PROOF
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(n = 75)
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green condition
(n = 77)
neutral condition
(n = 73)
Fig. 1. Choices of carrier across the three conditions.
Table 2
Frequencies of mentioned arguments
Argument Mentioned
(%)
Price considerations 71
Environmental considerations 62
Anticipated efforts caused by switching/laziness a
15
Distrust/scepticism of a provider 12
Given insufficient information about energy sources or
further conditions
9
Criticism of the default itself 2
a Excluded in neutral condition.
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neutral condition excluded). Third, in the cases where
participants reported insufficient information, most of
them wanted to learn more about the alternative option
(12 out of 16), whereas fewer people stated that they would
gather information about the default company (2 persons)
or about both companies for comparison (2 persons;
neutral condition excluded). Last, it is worth mentioning
that only very few people (2%) criticised the default itself
(‘‘I do not like becoming a customer of a utility
automatically; this is impertinent’’).
3.3.3. Discussion
The results of this experiment support the hypothesis
that people are more likely to choose the green option
when it is presented as the default than when it is presented
as an alternative. Moreover, a similar effect occurred
between the grey default format and a neutral presentation
format without any option being a default. (In reality,
however, this situation is rare, as German energy law
prescribes that incumbent utilities have to provide a ‘basic
supply’.)
The reasons the participants gave for their decisions
provide some indication of why electricity defaults work.
Expected inconvenience and uncertainty associated with
switching might prevent people from doing so. Furthermore,
distrust, scepticism, or complaints about insufficient
information referred, in most cases, to the alternative
option. Only a few participants seemed to assume that the
default option had to be assessed or that there could be
something wrong with it. Possibly, many people interpret
the default option as an implicit recommendation in the
sense that if there is a standard established by an authority,
it cannot be (very) wrong.
We have to admit that this experiment is different in
several ways from choosing an electricity supplier in reality.
First, in reality customers might not be directly confronted
with the decision problem, as in the questionnaire. Second,
in the questionnaire, the decision between the options can
be made without any real transaction costs or search costs,
and it has no real consequences. Third, in reality, some
people might not even know that they can choose their
electricity supplier. But all three arguments work in favour
of the default in the real world. In fact, this might explain
why substantially more participants switched in our study
than in real life. The same tendency can be found in the
organ donation study (Johnson & Goldstein, 2003). Our
next experiment looks into the influence of defaults in the
laboratory by investigating dependent variables other than
choice.
UNCORRECTED PROOF
3.4. Second laboratory experiment: willingness to pay and
accept
With this experiment we attempted to examine the
influence of defaults in the choice of electricity not by
directly testing how often the green utility is chosen but by
asking for the monetary value people attach to the green
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utility. In decision-making research, there are two ways to
measure this value: willingness to pay (WTP) and willingness
to accept (WTA). The main finding is that
WTA4WTP, that is, to give up a good, people want to
be given more money than they are willing to pay to
acquire that good (Kahneman, Knetsch, & Thaler, 1991).
This is called the endowment effect. In a sense, the
endowment effect and the effect of defaults are related
because the default is what people are endowed with. We
thus hypothesise that peoples’ WTA for green electricity
will be higher than their WTP for green electricity (the
corresponding hypothesis for grey electricity does not make
so much sense because people do not seem to be willing to
pay any extra amount of money for grey electricity).
3.4.1. Method and procedure
We gave participants a short questionnaire. The first
laboratory experiment showed that participants hesitated
to switch from one company to another. Hence, in this
second experiment, we stressed that no switching costs
would be involved. Furthermore, because some participants
criticised the lack of information in the first
experiment, we added a short introductory explanation
about electricity and its origins (see Appendix B). The
explanation stressed that various opinions exist about the
different forms of electricity supply (in Germany, not only
is the energy from nuclear power controversial, but also the
extension of wind power), so we wanted to survey
customers’ willingness to pay. We used a betweenparticipants
design with two conditions.
In the WTP condition, participants were asked if they
were willing to switch to green electricity given that they
currently have a grey tariff (see vignette in Appendix B). If
so, they were asked to indicate what extra premium they
would be willing to pay for this per month. Participants in
the WTA condition were asked if they would be willing to
switch to grey electricity given that they are supplied with
green electricity by default. Participants willing to switch
were asked to indicate how much cheaper the grey
electricity tariff would have to be to make them switch.
In both cases, participants had the option to state that
they would not switch by checking a ‘‘no’’ box. Following
Irwin, Slovic, Lichtenstein, and McClelland (1993), WTP
was assumed to be 0 for participants checking ‘‘no’’ in the
WTP condition. The interpretation is that they are simply
not willing to pay more for green electricity and thus their
response is ‘‘0’’.
Participants not providing a value in the WTA condition
were excluded from the WTP/WTA comparison (Irwin et
al., 1993) because it is well known that participants in
WTA conditions refuse to provide monetary values for
decisions with moral connotations (Kahneman et al.,
1991). Note that this behaviour might be interpreted as
‘‘I am not willing to switch to grey energy, even if it is for
free or for any compensation you offer’’. However, as this
response indicates support for the green option, the
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frequency of these ‘‘protest answers’’ in the WTA condition
is reported below.
Participants were also asked to make brief statements
about their behaviour. One more question checked whether
participants knew what they were paying in reality. A short
demographic section ended the questionnaire.
3.4.2. Participants
Eighty-eight participants (56 female, 32 male, age
M ¼ 25.0; SD ¼ 3.2) completed a questionnaire in the
laboratory while waiting for other experiments (and were
given a bar of chocolate). Seventy-seven per cent of the
participants were students. To select the sample size, a
power analysis was carried out to ensure that the study had
at least .80 power. We expected a substantial number of
participants (in the WTA condition) to provide no values
due to protest answers (see above), and therefore,
potentially unequal group sizes were taken into account.
3.4.3. Participants not providing values in the WTA
condition (‘‘protest answers’’)
Twenty-three of the 47 participants (43%) in the WTA
condition indicated that they were not willing to accept
compensation for switching (see above). These participants
were not included in the WTA/WTP comparison.
3.4.4. Willingness to pay and willingness to accept
For the remaining 65 participants, mean WTP and WTA
were analysed. Results are displayed in Fig. 2. The
participants’ WTP had a mean value of M ¼ h6.59
(SD ¼ h5.53, n ¼ 41). The mean WTA was M ¼ h13.00
(SD ¼ h7.34, n ¼ 24). A t-test revealed a significant
difference, t(63) ¼ 4.02, p ¼ .001. Cohen’s d was 1.03,
representing a large effect (Cohen, 1988).
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3.4.5. Switching behaviour
An alternative interpretation is that people checking
‘‘no’’ (in both conditions) were not willing to switch to the
alternative tariff. For this reason, we compared the share of
potential switchers and non-switchers. All 88 participants
were included in the analysis. As reported above, 23 of the
47 participants (43%) in the WTA condition were under no
means willing to switch, whereas 9 of 41 participants (22%)
in the WTP condition refused to switch (i.e. WTP ¼ 0).
The share of ‘‘stayers’’ is higher in the WTA condition,
w 2 (1) ¼ 6.9, p ¼ .009.
3.4.6. Statements
We used the same procedure as in the first laboratory
experiment, again with good interrater agreement (k
ranging from .85 to .95). Statements about the environment
(67% of the participants) or about the price difference
(65%) were predominant, while 48% of the participants
thought about both. But we were not able to detect any
differences that could be attributed to the varying
conditions.
The interpretation of the answers to the question of how
much the participants were paying turned out to be
difficult; most students live in shared flats, and many of
them could not give a precise estimation of their share of
the monthly bill (36% did not know what they were paying
at all; others gave the sum for the whole shared flat). As a
result, the variance of the sums was so high that we decided
to omit further analysis.
3.4.7. Discussion
As hypothesised, participants were willing to pay a small
premium for green electricity but demanded considerably
more in compensation for giving up the green electricity
supply. Note that only 57% of the participants in the WTA
condition were included in the WTP/WTA analysis: the
others stated that they would not switch no matter what
the reduction might be. Overall, the findings support our
hypothesis: once a green default is established, people are
either reluctant to move away from this reference point or
they demand a relatively large sum to do so (since
WTA4WTP).
4. General discussion: can defaults promote proenvironmental
behaviour?
We reported four studies that demonstrate a strong
effect of information presentation format, specifically of
the default used, on the choice of electricity utility. In
electricity markets as currently organised, this effect leads
to generation and consumption of energy from unsustainable
sources. Changing the grey default—by establishing a
green default or by just implementing a neutral choice
situation—results in a significantly higher percentage of
customers buying green electricity.
Although we suggested some explanations for why
defaults in electricity marketing work and provided some
UNCORRECTED PROOF
WTP (n= 41) WTA (n = 24)
Fig. 2. Stated willingness to pay and willingness to accept for green
electricity in euros. Error bars display standard error.
Please cite this article as: Pichert, D., & Katsikopoulos, K. V. Green defaults: Information presentation and pro-environmental.... Journal of
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exploratory analyses, we did not pursue this further here.
We focused on showing that they work. More theoretical
research is required, for example, on understanding better
the recommendations that people perceive to be implicit in
defaults (McKenzie et al., 2006). Another promising
direction could investigate the finding that people consider
themselves far more responsible for their actions than for
their omissions (Spranca, Minsk, & Baron, 1991).
At any rate, there may be opportunity for applications,
especially at a local level. Imagine a community whose
government plans to launch a new green electricity
programme to decrease the share of conventional power
production from older plants. If this was a legally and
politically feasible option, the community might enrol their
citizens automatically in the programme, thus establishing
a default. Of course citizens would be free to opt out of the
programme any time they wish. Another example might be
a block of flats that is supplied with green electricity when
people move in. Finally, apart from making the more
environmentally benign option the default, it may be worth
trying the least intrusive option of abandoning defaults
altogether.
We finish by urging for caution because the manipulation
of defaults has its limits. There are technical issues,
limitations of default effects, and moral issues. First, it may
be that, from an engineering standpoint, the implementation
of a green default is not possible. For example, it has
been argued that the national energy supply of a country
could not simply be replaced by renewable energy
production from one day to the next even if all the
consumers wanted to buy green power now. In the
Netherlands, for example, suppliers had to stop advertising
green power because it was sold out after 13% of the
customers decided to buy green electricity (Bird et al.,
2002). Perhaps, however, some imagination can be used to
develop creative solutions (e.g. voluntary premiums), since
the central issue is changing investment flows.
Second, note that even though the influence of defaults is
strong, if price differences become too large, customers
might react. For example, customers will not remain with a
tariff when it costs $1000 more each month regardless of
whether it is the default or not. Also, when customers
suspect that the vendor or the policy maker wants to force
an option upon them, they might react (Brown & Krishna,
2004).
Third and finally, policy makers intentionally changing
defaults may be accused of paternalistic manipulation
(Berg & Gigerenzer, 2007; Klein, 2004; Sunstein & Thaler,
UNCORRECTED PROOF
2003; Thaler & Sunstein, 2003). Of course, to some extent,
institutions always provide starting points and defaults.
And, from the environmental perspective, the existing
default is not the most desirable. However, frequent opting
out or switching might cause citizens to experience stress or
unpleasantness. It is not so trivial to impose a default
condition that conflicts with the fundamental values held
by an individual as this might force a person to react. But
when these ethical issues are taken into account, the
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manipulation of default rules actually might cause less
excitement than expected.
Dealing with the ‘‘human factor’’ in sustainable development
and pro-environmental behaviour can yield
theoretical and practical challenges (Gardner & Stern,
2002; Nickerson, 2003; Stern, 2000a, 2000b). Our specific
findings demonstrate that in many cases, what we prefer
depends on the context of choice and how the choice is
presented (Bettman, Luce, & Payne, 1998; Payne et al.,
1992); this has already been demonstrated for human
behaviour in areas such as health, finance, law, and
marketing. When it comes to environmental issues, it is
our conviction that a stronger consideration of insights
from decision-making research will contribute to a better
understanding and encouragement of pro-environmental
behaviour.
Acknowledgements
We would like to thank Yaniv Hanoch, Mark Heitmann,
Daniel Goldstein, Felix Warneken, Stefan Krauss and the
ABC Research Group for their comments and ideas.
Appendix A. Instructions in first laboratory experiment
(translated from German)
Grey condition: ‘‘Imagine you have to relocate to another
town. After you move into your new flat, you receive a
letter from the electric power supplier, Acon. You are told
that by moving into your new flat you became an Acon
customer: ‘Acon is pleased to welcome you as a new
customer. We are responsible for the basic electricity
supply in this residential area. We offer low-priced
electricity tariffs—you cannot beat our prices. Save money
with Acon! Your monthly premium is h25’. You are kindly
asked to fill in some personal data on an attached
document, which you do. A couple of days later a contract
is sent to you.
Some weeks later you find a flyer in you mailbox,
advertising offers from the electric power supplier EcoEnergy:
‘Switch to EcoEnergy! Did you know that you can
easily switch your electricity supplier? EcoEnergy sells clean
electricity, generated from renewable energy sources. Contribute
to climate protection and environmental protection!
Your monthly premium will be h30’’’.
What do you do? (please check box)
& Stay with Acon
& Switch to Ecoenergy
Green condition: The vignette described the reverse
situation; that is, the default company offered ‘green’
power and the advertisement was for cheaper electricity
(see text). Although premiums for electricity vary according
to individual consumption, participants were told by
the experimenter to accept the premiums as given for the
sake of simplicity.
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Neutral condition: Here, the vignette had slightly
different wording: ‘‘Imagine you have to relocate to
another town. After you move into your new flat, your
landlord kindly asks you to choose a power supplier. In
this building, two electric power companies offer electricity.
Here is some information about the two suppliers.’’
Then the information about the two companies is given. To
control for order effects, the order of the options was
permutated randomly.
Appendix B. Instructions in second laboratory experiment
(translated from German)
General information: ‘‘Electricity is produced in various
ways. In Germany, conventionally produced electricity is—
for the most part—generated by the burning of fossil fuels
(e.g. coal) and atomic power. So-called green electricity is
generated from renewable energy sources, such as water,
wind, biomass, and to a small degree, the sun. In the
majority of cases, green electricity is more expensive than
conventional electricity. Renewable energy sources are
considered to be more environmentally benign. By the way,
the household electricity that is provided to customers via
the grid is standardised and is technically homogeneous.
Only the way it is generated and fed into the grid might
vary according to the contracted utility. We would like to
emphasise that there are many different opinions about
both conventional methods of electricity generation and
renewable energies.
We have some questions about the electricity prices you
are willing to pay. Please read the questions carefully first.
We would like to encourage you to ‘try’ several numbers in
your head before giving your final answer.’’
WTP condition: ‘‘There are cities in Germany whose
inhabitants are supplied with conventionally produced
electricity. Imagine you live in one of these cities. You are
free to switch to green electricity, if you wish. Then you
would pay a higher monthly premium. Would you be
willing to switch?’’
& NO.
& YES. If yes, what is the maximum additional amount
you would be willing to pay each month?
______ euros
WTA condition: ‘‘There are German cities whose
inhabitants are supplied with green electricity by default.
Imagine you live in one of these cities. You are free to
UNCORRECTED PROOF
switch to conventionally produced electricity, if you wish.
Then you would pay a lower monthly premium. Would
you be willing to switch?’’
& NO.
& YES. If yes, what is the minimum amount by which
your monthly premium would have to be reduced?
______ euros
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