Framing Effects in an Emissions Trading Experiment with Voluntary Compliance

Purpose – The chapter reports a laboratory emissions trading experiment with imperfect enforcement that introduces environmental framing as a treatment variable. Methodology – The research uses the methodology of laboratory experimental economics. In the current design, subjects self-reported their “emissions” at the end of each trading period and were inspected probabilistically and fined when they underreported. Findings – Transaction volume and compliance rates were significantly lower in the environmentally framed condition, compared to the more standard neutrally framed control. Practical implications – The latter result suggests that environmental framing reduced subjects' incentives to honestly report “pollution” to the experimental “regulator.” As experimenters employ more “framed field experiments” outside the lab, it may be important to evaluate such pure framing effects in the lab if a main research goal is to compare lab and field experiment outcomes. Originality/value – Experimental economics research rarely manipulates environmental framing as a treatment variable. The substantial impact of framing on subject behavior documented in this study highlights its importance, particularly in the presence of moral concerns such as honest reporting.