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 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 can be 200% larger than the Pigouvian benchmark when combined with information.

Information nudges, subsidies, and crowding out of attention: field evidence from energy efficiency investments

Rodemeier, Matthias;
In corso di stampa

Abstract

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 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 can be 200% larger than the Pigouvian benchmark when combined with information.
In corso di stampa
2025
Rodemeier, Matthias; Löschel, Andreas
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11565/4071364
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