Skip to Main Navigation

The Implications of Behavioral Economics for Public Utility Policies

December 8, 2020




View the Presentation (PDF)

  • The provision and pricing of water and electricity services are perennial policy concerns in developing countries. Along with cost-recovery, expanding access, and maintaining affordability for the poor, conservation goals are increasingly coming to the fore. According to neoclassical economics, intelligent policy design in this space requires understanding how “rational” utility customers respond to price incentives. Behavioral economics, however, contends that consumers do not always behave rationally so that the neoclassical economist’s toolkit may sometimes be inadequate for predicting responses to policy changes and the welfare implications thereof.

    In this talk, World Bank economist Hanan Jacoby will help bridge the gap between the cognitive limitations flagged by behavioral economics and the policy questions faced by public utilities the world over. The talk will draw on recent research in Vietnam, where unique experiments were undertaken in partnership with both a water and an electricity service provider. The electricity experiment allows a study of consumer inattention and the value of providing real-time usage information, while the piped water experiment addresses how new utility services should be priced when consumers unwittingly form habits.  

  • Image

    Hanan Jacoby (Speaker)

    Lead Economist

    Hanan Jacoby is a Lead Economist in the Sustainability and Infrastructure Team of the Development Research Group. He received a Ph.D. in economics from the University of Chicago in 1989. Before joining the Bank in 1998, he taught at the University of Rochester and also visited Princeton, Penn, and IFPRI. Mr. Jacoby has wide-ranging interests in agriculture, rural institutions, and human capital and has published articles on land tenancy, groundwater markets, rural roads, risk-coping, child nutrition and schooling, and the economics of marriage in journals such as American Economic Review, Economic Journal, Journal of Political Economy, and Review of Economic Studies. He currently serves as associate editor for Journal of Development Economics and Economic Development and Cultural Change.


    Richard Damania (Discussant)

    Chief Economist, Sustainable Development

    Richard Damania is the Chief Economist for the World Bank's Sustainable Development Practice Group. Previously, he was the Global Lead Economist in the World Bank’s Water Practice, where he led the Practice’s work on analytical, advisory, and operational engagements related to the role of water and the economy.


    Deon Filmer (Chair)

    Director of Research

    Deon Filmer is Director of the Research Group at the World Bank. He has previously served as Acting Research Manager in the Research Group, Co-Director of the World Development Report 2018: Learning to Realize Education’s Promise, and Lead Economist in the Human Development department of the Africa Region of the World Bank. He works on issues of human capital and skills, service delivery, and the impact of policies and programs to improve human development outcomes—with research spanning the areas of education, health, social protection, and poverty and inequality. He has published widely in refereed journals, including studies of the impact of demand-side programs on schooling and learning; the roles of poverty, gender, orphanhood, and disability in explaining education inequalities; and the determinants of effective service delivery.

  • The monthly Policy Research Talks showcase the latest findings of the World Bank’s research department, challenge and contribute to the institution’s intellectual climate, and re-examine conventional wisdom in current development theories and practice. These talks facilitate a dialogue between researchers and operational staff and inform World Bank operations both globally and within partner countries. Read More »