Enforcement and Deterrence with Certain Detection: an Experiment in Water Conservation Policy

Oliver R. Browne (The Brattle Group)

Ludovica Gazze (University of Warwick)

Michael Greenstone (University of Chicago)

Olga Rostapshova (University of Chicago)

Abstract: New technologies are poised to transform regulatory enforcement by automating costly inspections and driving violation detection rates to 100%. We conduct a randomized field experiment to evaluate the adoption of smart meters for enforcing outdoor water-use regulations in a major US city facing water scarcity. We randomize 88,905 households into 12 groups varying enforcement method (automated or visual inspection) and fine levels. Automated enforcement decreases water use by 3% and violations by 17%. However, due to imperfect deterrence, fines increase by 13,800% and customer service calls increase by 545%, leading to backlash that might make maximum enforcement politically untenable.