The Marginal Internality

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Principal investigator:

Hunt Allcott

New York University

Email: hunt.allcott@nyu.edu

Homepage: https://files.nyu.edu/ha32/public/


Sample size: 1253

Field period: 09/07/2012-07/26/2013

Abstract

Imperfect information and inattention to energy costs are important potential justifications for energy efficiency standards and subsidies. We evaluate these policies 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. In the context of the model, 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.

Hypotheses

First, how much does information provision affect demand for CFLs?
Second, if powerful information provision is costly or infeasible, does a CFL subsidy or a ban on incandescents increase welfare as a second best solution to imperfect information and inattention?

Experimental Manipulations

The main manipulation is to provide energy cost and bulb replacement cost information for Compact Fluorescent Lightbulbs vs. incandescent lightbulbs.

Outcomes

Willingness-to-pay for lightbulbs, as measured with a multiple price list.

Summary of Results

In the context of the model, 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.

References

References

Allcott, Hunt, and Dmitry Taubinsky. "The Lightbulb Paradox: Evidence from Two Randomized Experiments."