Evaluating Behaviorally Motivated Policy: Experimental Evidence from the Lightbulb Market
American Economic Review
vol. 105,
no. 8, August 2015
(pp. 2501-38)
(Complimentary)
Abstract
Imperfect information and inattention to energy costs are important potential motivations for energy efficiency standards and subsidies. We evaluate these motivations in the lightbulb market using a theoretical model and two randomized experiments. We derive welfare effects as functions of reduced-form sufficient statistics capturing economic and psychological parameters, which we estimate using a novel within-subject information disclosure experiment. The main results suggest that moderate subsidies for energy-efficient lightbulbs may increase welfare, but informational and attentional biases alone do not justify a ban on incandescent lightbulbs. Our results and techniques generate broader methodological insights into welfare analysis with misoptimizing consumers. (JEL D12, D83, H21, H31, L67, Q41, Q48)Citation
Allcott, Hunt, and Dmitry Taubinsky. 2015. "Evaluating Behaviorally Motivated Policy: Experimental Evidence from the Lightbulb Market." American Economic Review, 105 (8): 2501-38. DOI: 10.1257/aer.20131564Additional Materials
JEL Classification
- D12 Consumer Economics: Empirical Analysis
- D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- H21 Taxation and Subsidies: Efficiency; Optimal Taxation
- H31 Fiscal Policies and Behavior of Economic Agents: Household
- L67 Other Consumer Nondurables: Clothing, Textiles, Shoes, and Leather Goods; Household Goods; Sports Equipment
- Q41 Energy: Demand and Supply; Prices
- Q48 Energy: Government Policy