In Washington D.C., a 5-cent fee for use of disposable plastic bags was added to reflect the negative externalities of creating trash. This resulted in a 45% decrease in plastic bag usage, along with a 33% increase in reusable bag usage. Notably, a similar policy in which individuals received a 5-cent bonus if they didn’t use a plastic bag had a minimal effect on decreasing disposable bag use or increasing reusable bag use. This is because of loss aversion; the idea of a 5-cent loss is more emotionally salient than the idea of a 5-cent gain.
Other Applications: Savings and Financial Decisions