The Effects of Information and Network on Non-Point Source Pollution: A Laboratory Experiment

Abstract

This research employs a laboratory experiment to analyze the impact of information networks, an emissions-reduction technology subsidy, and a pro-abatement nudge on non-point source (NPS) pollution levels. Participants made input and technology decisions which generated pollutants under an ambient tax. Three information treatments are evaluated in a 3x2 design, orthogonal to a nudge. When combined with the nudge, the ambient mechanism induces socially optimal emissions levels when no information on others’ technology adoption and/or subsidy provision is known. Under certain conditions, observing another’s technology adoption is found to increase an individual’s own likelihood of adoption. Subsidies are found to lower pollutants and increase adoption regardless of the level of information flows in a network. The findings suggest that subsidies and nudges may be effective in reducing NPS levels, but that care must be taken when incentivizing producers in scenarios with high information flows regarding others’ technology adoption.