Information Nudges, Subsidies, and Crowding Out of Attention: Field Evidence from Energy Efficiency Investments

Arbeitspapier

How can information substitute or complement financial incentives such as Pigouvian subsidies? We answer this question in a large-scale field experiment that cross-randomizes energy efficiency subsidies with information about the financial savings of LED lighting. Information has two effects: It shifts and rotates demand curves. The direction of the shift is ambiguous and highly dependent on the information design. Informing consumers that an LED saves 90% in annual energy costs increases LED demand, but showing them that 90% corresponds to an average of 11 euros raises demand for less efficient technologies. The rotation of the demand curve is unambiguous: information dramatically reduces both own-price and cross-price elasticities, which makes subsidies less effective. The uniform decrease in price elasticities suggests that consumers pay less attention to subsidies when information is provided. We structurally estimate that welfare-maximizing subsidies are up to 150% larger than the Pigouvian benchmark when combined with information.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 16141

Classification and Topics

• Classification: Wirtschaft ; Allocative Efficiency; Cost-Benefit Analysis ; Search; Learning; Information and Knowledge; Communication; Belief; Unawareness ; Taxation and Subsidies: Efficiency; Optimal Taxation ; Energy: Demand and Supply; Prices ; Energy: Government Policy
• Subject: information ; nudges ; optimal taxation ; internality taxes ; field experiments ; energy efficiency ; behavioral public economics

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Rodemeier, Matthias ; Löschel, Andreas
• Event: Veröffentlichung
• (who): Institute of Labor Economics (IZA)
• (where): Bonn
• (when): 2023

Further information

• Handle: http://hdl.handle.net/10419/272768
• Last update: 10.03.2025, 11:44 AM CET