A new study shows how behavioural economics and smart incentives can drive lasting water conservation without high financial costs.
As Australia faces rising temperatures and more frequent droughts, finding effective water-saving methods has never been more urgent. A new international study has revealed that behavioural economics and smart incentives, rather than traditional rebates alone, could be the key to changing how households and communities think about water.
Published in the INFORMS journal Decision Analysis, the study explores how governments and utilities can better design water conservation programs. Instead of relying solely on financial incentives, researchers used game theory and behavioural science to demonstrate how education and social norms can lead to long-term behavioural change.
Smarter strategies for saving water
Lead author Dr Behnam Momeni of George Mason University said the research highlights a shift in approach. “We’re running out of fresh water, and we need better tools to get people to conserve,” he said. “It turns out that smart incentive design, using education and social influence, can often outperform costly rebates.”
The study models how individuals make water use decisions over time. It finds that providing information about the importance of conservation, combined with fostering social environments where saving water is normalised, makes people more likely to act. This can occur without the need for ongoing financial pressure.
This new approach to behavioural economics and smart incentives brings together insights from psychology, economics and systems modelling. By identifying the tipping points where social pressure and awareness drive action, the study shows how modest interventions can deliver lasting change.
Social norms over subsidies
In one scenario, the researchers demonstrated that public education campaigns encouraging water conservation in high-use areas, such as households with large gardens, were just as effective as offering financial rewards.
When people see neighbours conserving water, that behaviour spreads. This peer effect acts as a form of social incentive. It has low implementation costs and a strong behavioural impact. These effects become even more powerful when paired with campaigns highlighting the urgency of saving water.
Implications for Australia
Australia is the driest inhabited continent, and its long history of water shortages makes this research particularly relevant. Local councils and water utilities are actively seeking affordable, scalable conservation strategies that work across a variety of demographics and environments.
Adopting behavioural economics and smart incentives in regional and metropolitan water programs could help reduce water use without requiring ongoing subsidies or pricing adjustments. For example, targeting suburbs with high irrigation demand using school-based education and public messaging may achieve greater long-term outcomes than rebate programs alone.
Dr Momeni and his team noted that these strategies are most effective when water use is visible. Activities such as outdoor watering or car washing offer a natural stage for social cues to influence behaviour.
From theory to action
The study provides a new framework for policy designers to evaluate the long-term impact of conservation strategies. By applying insights from behavioural economics and game theory, the research helps governments create smarter, more sustainable public policy for water and other resources.
It raises an important shift in mindset. Instead of asking how much money is needed to influence behaviour, policymakers should ask what it takes to influence attitudes.
About the research
The study, titled “Differential Game Theoretic Models for Designing Water Conservation Incentives”, appears in Decision Analysis, a peer-reviewed journal from INFORMS. It provides advanced modelling tools for understanding how people respond to different types of incentives over time and offers practical guidance for effective program design.
Read the full article here – https://pubsonline.informs.org/doi/abs/10.1287/deca.2024.0208?journalCode=deca
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