Evaluating Behaviorally Motivated Policy: Experimental Evidence from the Lightbulb Market

Hunt Allcott and Dmitry Taubinsky

American Economic Review, 2015, vol. 105, issue 8, 2501-38

Abstract: Imperfect information and inattention to energy costs are important potential motivations for energy efficiency standards and subsidies. We evaluate these motivations 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. 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. Our results and techniques generate broader methodological insights into welfare analysis with misoptimizing consumers. (JEL D12, D83, H21, H31, L67, Q41, Q48)

JEL-codes: D12 D83 H21 H31 L67 Q41 Q48 (search for similar items in EconPapers)
Date: 2015
Note: DOI: 10.1257/aer.20131564
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Citations: View citations in EconPapers (213)

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