Change the relative cost
Price signal
Price-signal interventions change the financial cost of a behavior — congestion pricing, plastic bag charges, sugar taxes, copays, EITC, subsidies. The mechanism is straightforward economics: small price changes shift behavior at the margin, larger ones shift it more.
13
Experiments
7
Policy areas
1971–2016
Year span
10 / 13
Positive
When it works
When the behavior is price-elastic and when the price change is visible at the moment of decision. Even small charges (UK 5p bag fee) can produce large behavior shifts when they make a previously-mindless action deliberate.
Watch out for
Price interventions are often regressive — the same charge affects low-income recipients more. Carbon pricing and sugar taxes need to be paired with rebates or progressive design or they hit the wrong people hardest.
Price signal across policy areas
Transportation· 4 experiments
- Positive
5p Plastic Bag Charge
UK Department for Environment, Food & Rural Affairs · England, UK · 2015
Effect: −95% single-use plastic bags distributed by major supermarkets between 2015 and 2021; from 7.6 billion bags/year to <300 million
- Positive
Milan Area C Congestion Charge
Politecnico di Milano / Municipality of Milan · Milan, Italy · 2012
Effect: Vehicle entries into the charge zone fell 30% in the first year; PM10 concentrations fell 18%; average road speed inside the zone increased 8%; public transit ridership in the zone increased 3%
- Positive
Stockholm Congestion Pricing Trial
Swedish Transport Agency · Stockholm, Sweden · 2006
Effect: Traffic volumes fell 22% during trial; CO2 emissions near cordon fell 14%; public transit ridership +6%; effects persisted fully after permanent implementation
- Positive
London Congestion Charge
Transport for London · London, UK · 2003
Effect: Traffic volume: −15% in charging zone in first year; journey time delays: −30%; bus reliability: significantly improved; public transport ridership: increased; NOx emissions in charging zone: −12%
Public Health· 2 experiments
- Positive
Mexico Sugar-Sweetened Beverage Tax
Mexican Ministry of Finance / Mexican Institute of Public Health (INSP) / University of North Carolina evaluation · Mexico (national) · 2014
Effect: SSB purchases declined by 5.5% in the first year and 9.7% in the second year vs. pre-tax trend; effect was largest among lowest-income households (~17% reduction). Water purchases increased by 2-4%. Industry data showed beverage manufacturers reformulated some products to reduce sugar content and avoid the tax threshold. Caloric reduction estimates suggest 6-7 fewer kcal/person/day.
- Mixed
RAND Health Insurance Experiment
RAND Corporation · Multiple US cities · 1971
Effect: Utilization: free care participants used 30–40% more health care than those in high-cost-sharing plans. Health outcomes: almost no significant difference across cost-sharing levels for the average person, except for the poorest and sickest individuals — for whom free care meaningfully improved blood pressure and vision outcomes. Free care improved low-income hypertension control by 10 percentage points.
International Development· 2 experiments
- Positive
Rwanda Performance-Based Financing for Health
World Bank / Ministry of Health Rwanda · Rwanda · 2010
Effect: Institutional deliveries: +23%; complete child vaccination: +5 pp; quality index: +0.10 SD; staff effort and record quality improved
- Positive
Kenya Insecticide-Treated Bednet Distribution
IPA / Harvard / MIT · Western Kenya · 2003
Effect: Free distribution: 99% take-up; subsidized (10 cents): 75%; near-market price: 25%; usage among recipients did not differ significantly by price paid; no 'free makes you value it less' effect found
Energy & Environment· 2 experiments
- Positive
Regional Greenhouse Gas Initiative (RGGI) — Cap-and-Trade Evaluation
Resources for the Future / Acadia Center / multiple academic evaluations · Northeastern United States (12 states) · 2009
Effect: RGGI-state electricity emissions declined by approximately 50% between 2009 and 2020 — substantially faster than non-RGGI state declines (~30%) and faster than the program's own declining cap had required. Independent econometric studies attribute 20-30% of the decline directly to RGGI policy. Electricity prices in RGGI states grew more slowly than in non-RGGI states. Modest leakage of generation to non-RGGI states was detected but offset by other compliance pathways.
- Positive
British Columbia Carbon Tax
Province of British Columbia · British Columbia, Canada · 2008
Effect: Fuel consumption 15% lower than rest of Canada by 2012; GDP growth roughly equivalent; emissions per capita down 10%