Conformity and Conservation: Evidence from Home Landscaping and Water Conservation

Abstract

How do consumers value conformity, and what are the implications for conservation policy? In this article, we study conformity in homeowners’ landscaping choices—which have important consequences for water consumption—for housing parcels throughout a large arid American city. We use machine learning techniques to generate precise land cover classifications on each parcel from remote sensing imagery, allowing us to obtain hedonic estimates of the marginal value of conformity. Our work is unique as the first to study this behavioral phenomenon using rich observational data from a real-world market. We then overlay these estimates on a theoretical model to characterize how conformity motives interact with conservation. We find that Pigouvian pricing is roughly half as effective in the presence of conformity, as our estimated conformity effects will countervail price effects. This work shows how behavioral phenomena, such as conformity, may have empirically relevant impacts on the effectiveness of standard conservation interventions.