Advanced Search
MyIDEAS: Login to save this paper or follow this series

Rational Inattention and Energy Efficiency

Contents:

Author Info

  • James M. Sallee

Abstract

If time and effort are required to accurately ascertain the lifetime value of energy efficiency for a durable good, consumers might rationally ignore energy efficiency. This paper argues that such inattention may be rational in the market for automobiles and home appliances. To do so, it develops a heuristic model of a consumer's decision problem when purchasing an energy consuming durable good in which uncertainty about each good's energy efficiency can be resolved via costly effort. The model indicates under what conditions the consumer will be less likely to undertake this effort. The empirical portion of the paper argues that energy efficiency is often not pivotal to choice. This, along with a simulation of the automobile market, suggests that returns to paying attention to energy may be modest, and analysis of the information readily available to consumers suggests that the costs of being fully informed may be substantial. The paper discusses the implications of rational inattention for public policy and for empirical research on the energy paradox.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nber.org/papers/w19545.pdf
Download Restriction: Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19545.

as in new window
Length:
Date of creation: Oct 2013
Date of revision:
Handle: RePEc:nbr:nberwo:19545

Note: EEE
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Xavier Gabaix, 2011. "A Sparsity-Based Model of Bounded Rationality," NBER Working Papers 16911, National Bureau of Economic Research, Inc.
  2. James M. Sallee, 2011. "The Surprising Incidence of Tax Credits for the Toyota Prius," American Economic Journal: Economic Policy, American Economic Association, American Economic Association, vol. 3(2), pages 189-219, May.
  3. Heutel, Garth, 2010. "Optimal Policy Instruments for Externality-Producing Durable Goods under Time Inconsistency," Working Papers 10-5, University of North Carolina at Greensboro, Department of Economics.
  4. Kenneth E. Train & Clifford Winston, 2007. "Vehicle Choice Behavior And The Declining Market Share Of U.S. Automakers," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(4), pages 1469-1496, November.
  5. Moorthy, Sridhar & Ratchford, Brian T & Talukdar, Debabrata, 1997. " Consumer Information Search Revisited: Theory and Empirical Analysis," Journal of Consumer Research, University of Chicago Press, University of Chicago Press, vol. 23(4), pages 263-77, March.
  6. Austin, David & Dinan, Terry, 2005. "Clearing the air: The costs and consequences of higher CAFE standards and increased gasoline taxes," Journal of Environmental Economics and Management, Elsevier, vol. 50(3), pages 562-582, November.
  7. Goldberg, Pinelopi Koujianou, 1998. "The Effects of the Corporate Average Fuel Efficiency Standards in the US," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 46(1), pages 1-33, March.
  8. James M. Sallee & Joel Slemrod, 2010. "Car Notches: Strategic Automaker Responses to Fuel Economy Policy," NBER Working Papers 16604, National Bureau of Economic Research, Inc.
  9. Steven T. Berry, 1994. "Estimating Discrete-Choice Models of Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 242-262, Summer.
  10. Alisdair McKay & Filip Matejka, 2011. "Rational Inattention to Discrete Choices: A New Foundation for the Multinomial Logit Model," 2011 Meeting Papers 535, Society for Economic Dynamics.
  11. Hunt Allcott & Michael Greenstone, 2012. "Is There an Energy Efficiency Gap?," NBER Working Papers 17766, National Bureau of Economic Research, Inc.
  12. Soren T. Anderson & James M. Sallee, 2011. "Using Loopholes to Reveal the Marginal Cost of Regulation: The Case of Fuel-Economy Standards," American Economic Review, American Economic Association, American Economic Association, vol. 101(4), pages 1375-1409, June.
  13. Greene, David L., 2011. "Uncertainty, loss aversion, and markets for energy efficiency," Energy Economics, Elsevier, Elsevier, vol. 33(4), pages 608-616, July.
  14. Pedro Bordalo & Nicola Gennaioli & Andrei Shleifer, 1969. "Competition for Attention," Working Paper 76811, Harvard University OpenScholar.
  15. Shanjun Li & Roger von Haefen & Christopher Timmins, 2008. "How Do Gasoline Prices Affect Fleet Fuel Economy?," NBER Working Papers 14450, National Bureau of Economic Research, Inc.
  16. Jerry A. Hausman, 1979. "Individual Discount Rates and the Purchase and Utilization of Energy-Using Durables," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 10(1), pages 33-54, Spring.
  17. Adam Copeland & Wendy Dunn & George Hall, 2011. "Inventories and the automobile market," RAND Journal of Economics, RAND Corporation, vol. 42(1), pages 121-149, 03.
  18. Meghan R. Busse & Christopher R. Knittel & Florian Zettelmeyer, 2013. "Are Consumers Myopic? Evidence from New and Used Car Purchases," American Economic Review, American Economic Association, American Economic Association, vol. 103(1), pages 220-56, February.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Hunt Allcott & Michael Greenstone, 2012. "Is There an Energy Efficiency Gap?," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 26(1), pages 3-28, Winter.
  2. Newell, Richard G. & Siikamäki, Juha, 2013. "Nudging Energy Efficiency Behavior: The Role of Information Labels," Discussion Papers, Resources For the Future dp-13-17, Resources For the Future.
  3. Sébastien Houde, 2014. "How Consumers Respond to Environmental Certification and the Value of Energy Information," NBER Working Papers 20019, National Bureau of Economic Research, Inc.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:19545. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.