LAUSR

Abstract It is challenging to engage customers in demand response programs, which require significant interventions in customers’ normal energy consumption patterns. Moreover, little is known about how customers can be motivated to adopt innovations that promote collective benefits. This research investigates the effectiveness of the two most basic elements of incentive-based policies — reward and punishment — with regard to customer participation in the sustainable energy domain. We counter the prevailing assumptions in innovation and technology research that favor the use of reward rather than punishment to engage customers. Based on a series of experimental studies, we find mixed evidence. It appears that punishment is at least as effective as reward in engaging customers in sustainable technology innovations. Even more importantly, both reward and punishment are shown to overcome concerns relating to technology. Moderated mediation reveals that economic incentives and disincentives ameliorate critical obstacles because customers more strongly favor their own personal benefit over the collective benefit and are more willing for ‘self-serving’ reasons to adopt technology that contributes to collective benefits. The findings of this research thus have novel practical and theoretical implications for energy innovation involving customers.