Offering Energy Efficiency under Imperfect Competition and Consumer Inattention
No 2016-6, EWI Working Papers from Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI)
Energy eﬃciency is considered to be a win-win situation for both the economy and the environment. Producing products and services at lower energy input and related input costs can contribute to climate change abatement and economic competitiveness. Actual implementation of energy eﬃciency falls short to expectations, though. For one thing, research suggests that consumer inattention is an underlying force for underinvestments. For another thing, energy supply markets are often characterized by imperfect competition. Do ﬁrms in the energy retail market have incentives to voluntarily introduce energy eﬃciency? Or should informational regulation inform inattentive consumers? In this article I show that consumer inattention and imperfect competition are the crucial drivers for ﬁrms' decisions to introduce or conceil energy eﬃciency to customers. I ﬁnd two symmetric equilibria: One in which both ﬁrms introduce energy eﬃciency and one in which both ﬁrms conceil energy eﬃciency. Equilibrium coordination depends on the distribution of consumers that are attentive to energy effienciency and consumers that are not. Further, mandatory disclosure laws are found to be weakly welfare increasing.
Keywords: Imperfect Competition; Consumer Inattention; Product Diﬀerentiation; Disclosure; Energy Efficiency (search for similar items in EconPapers)
JEL-codes: D83 L13 L41 (search for similar items in EconPapers)
Pages: 29 pages
New Economics Papers: this item is included in nep-com, nep-ene, nep-env, nep-ger, nep-mkt and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:ris:ewikln:2016_006
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