Do Consumers Acquire Information Optimally? Experimental Evidence from Energy Efficiency

Andrea La Nauze and Erica Myers

No 10335, CESifo Working Paper Series from CESifo

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. To test for optimal information acquisition we compare the average utility gain from improved decision making due to information with willingness to pay for information. We find that consumers acquire information suboptimally. We then compare two behavioral policies: a conventional subsidy for energy-efficient products and a non-traditional subsidy paying consumers to acquire information on energy costs. The welfare effects of each policy depend on the benefits of improved decisions versus the losses of mental effort (from the information subsidy) or distorted choices (from the product subsidy). In our context, information subsidies dominate product subsidies. In a variety of settings where decisions are made and information is delivered online, paying for attention could more effectively target welfare improvements.

Keywords: endogenous information acquisition; behavioral bias; information interventions; energy efficiency (search for similar items in EconPapers)
JEL-codes: D12 D83 D91 Q41 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-com, nep-dcm, nep-ene, nep-exp and nep-upt
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Working Paper: Do Consumers Acquire Information Optimally? Experimental Evidence from Energy Efficiency (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_10335

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