Social Norms Information Treatments in the Municipal Water Supply Sector: Some New Insights on Benefits and Costs

Abstract

Social norms comparisons are tools that are being used more and more often by energy and water utilities all over the world in order to induce households to conserve resources. Such conservation programs are appealing to utilities since they are an easy-to-implement alternative to raising prices and commonly result in short-term reductions in energy and water use of about 2–5%. However, the welfare effects of social norms programs are rarely discussed and assessed, especially in the context of municipal water supply. The purpose of this paper is to identify the costs and benefits of social norms information treatments (SNITs) to all social groups and to illustrate a conceptual framework for conducting a benefit–cost analysis of social norms treatments in the municipal water sector. We provide plausible estimates for the costs and benefits of social norms treatments to different affected groups in the municipal water supply sector using current knowledge for both developing and industrialized countries in order to show how practitioners can conduct a benefit–cost analysis of an SNIT for a specific water utility. Our calculations show that the outcome of a benefit–cost analysis of an SNIT is highly location-specific and likely subject to substantial uncertainty. We also present a simple benefit–cost analysis of a price increase that would lead to an equivalent initial reduction in household water use. The latter is found to be more likely to result in net benefits to the society as a whole in low- and middle-income countries, but we show that, in this case, households would have to bear most of the costs.