Investments in environmental quality under limited attention

Stefanie Y. Schmitt

No 202, BERG Working Paper Series from Bamberg University, Bamberg Economic Research Group

Abstract: Consumers increasingly care about the environmental quality of the goods they consume. However, limited attention impairs consumers' ability to compare and evaluate the environmental quality of goods. I show that investments in environmental quality, consumer surplus, producer surplus, and welfare are non-monotonic functions of attention. Average environmental quality, consumer surplus, producer surplus, and welfare are highest under intermediate (but different) levels of atten-tion. In addition, limited attention influences the effectiveness of policy interventions. I identify conditions under which emission taxes, subsidies, information campaigns, and mandatory disclosure lead to less investments in environmental quality, more emissions, lower consumer surplus, or lower welfare.

Keywords: environmental quality; environmental policies; limited attention (search for similar items in EconPapers)
JEL-codes: D91 L13 Q55 Q58 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bamber:313019

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