The Hidden Cost of Minimum Quality Standards: Evidence from the U.S. Clothes Washer Market

Sebastien Houde and Tobias Wekhof
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Sebastien Houde: HEC Lausanne, Department of Economics
Tobias Wekhof: Center for Energy Policy and Economics at ETH Zurich

No 25/400, CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich

Abstract: Minimum standard regulations for durables have long been suspected of having hidden costs: quality improvements in the regulated dimension reduce quality in other dimensions. We substantiate this claim for the U.S. clothes washer market, which has become a notorious example of the hidden cost phenomenon due to a 2004 energy efficiency requirement. We find that overall quality increased from 2001 to 2011, and these gains were primarily driven by improvements in energy efficiency. Quality in the non-energy dimensions declined or remained constant after the major standard change. These hidden costs were, however, compensated by energy-efficiency improvements.

Keywords: Minimum Quality Standard; Hidden Cost; Energy Efficiency Regulations; Appliance Market; Ex Post Analysis (search for similar items in EconPapers)
JEL-codes: D12 L51 L68 Q48 Q55 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2025-09
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Persistent link: https://EconPapers.repec.org/RePEc:eth:wpswif:25-400

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