Working Paper: NBER ID: w31742
Authors: Andrea La Nauze; Erica Myers
Abstract: We use an experiment to test whether consumers optimally acquire information on energy costs in appliance markets where, like many contexts, consumers are poorly informed and make mistakes despite freely-available information. We find consumers acquire information suboptimally; there is little correlation between the revealed utility gain from improved decision making due to information and willingness to pay for information. We compare two behavioral interventions to address consumer mistakes: a conventional subsidy for energy-efficient products and a non-traditional subsidy paying consumers to view information on energy costs. We show that paying for attention can target welfare improvements more effectively.
Keywords: information acquisition; energy efficiency; consumer behavior; behavioral interventions
JEL Codes: D12; D83; D91; Q41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Consumers do not optimally acquire information about energy costs (D19) | Errors in decision-making stem from mental gaps (D91) |
| Behavioral interventions (C99) | Consumer information acquisition (D18) |
| Conventional subsidy for energy-efficient products (Q41) | Consumer information acquisition (D18) |
| Nontraditional subsidy that pays consumers to acquire information (D89) | Consumer information acquisition (D18) |
| Paying for attention (J33) | Welfare improvements (I38) |
| Biased beliefs (D91) | Information acquisition (D83) |
| Initial preferences for energy efficiency and political leanings (D72) | Probability of undervaluing information (D80) |
| Nontraditional subsidy (H23) | Mental gaps in information acquisition (D83) |