To measure how moral behaviour interacts with pricing regimes, we conduct highly controlled experiments in which trading creates pollution. We compare indirect pricing (here, a cap and trade mechanism) and direct pricing (a tax) in an otherwise equivalent setting in which ‘producers’ are incentivized to emit CO2. ‘Judges’ decide on central trading parameters that may restrict socially harmful activities. Profit maximization predicts the same producer behaviour in either setting in the absence of regulation, yet we find a substantial share of producers refraining from emitting CO2 at all. Although judges restrict behaviour in similar ways across mechanisms, direct pricing more effectively accommodates moral behaviour than the quantity policy.
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All data reported in this paper are available in the Supplementary Information.
The data was analysed with the software Stata. A Stata do-file that allows for the replication of the analyses reported in our paper is available for download together with our dataset.
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We thank conference and seminar participants in Berlin, Cologne, Mannheim and Paderborn for valuable comments and suggestions. We thank L. Jung for excellent research assistance. Financial support of the German Research Foundation for the experiment through the research unit ‘Design & Behavior’ (FOR 1371) is acknowledged. This project also received support from the European Research Council (ERC) under the European Union’s Horizon 2020 research and innovation programme (grant agreement no. 741409; the results reflect the authors’ views and the ERC is not responsible for any use that may be made of the information it contains) and from the Deutsche Forschungsgemeinschaft (DFG, German Research Foundation) under Germany’s Excellence Strategy – EXC 2126/1– 390838866.
The authors declare no competing interests.
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Supplementary Tables 1–5, discussion, methods and references.
Experiment data from participants in the role of judges.
List and description of variables included in the dataset OWE_Data_Judges_Experiment.dta.
Experiment data from participants in the role of producers.
List and description of variables included in the dataset OWE_Data_Producers_Experiment.dta.
Data from the simulated market outcomes.
List and description of variables included in the dataset OWE_Data_Simulations_Markets.dta.
Stata do-file that performs all analyses on the experiment data and simulation data as reported in the paper.
Read-me file that describes the supplementary data files.
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Ockenfels, A., Werner, P. & Edenhofer, O. Pricing externalities and moral behaviour. Nat Sustain 3, 872–877 (2020). https://doi.org/10.1038/s41893-020-0554-1
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