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How Consumers Respond to Environmental Certification and the Value of Energy Information

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  • Sébastien Houde

Abstract

The ENERGY STAR certification is a voluntary labeling that favors the adoption of energy efficient products. In the US appliance market, the label is a coarse summary of otherwise readily accessible information. Using micro-data of the US refrigerator market, I develop a structural demand model and find that consumers respond to certification in different ways. Some consumers have a large willingness to pay for the label, well beyond the energy savings associated with certified products; others appear to pay attention to electricity costs, but not to the certification, and still others appear to be insensitive to both electricity costs and ENERGY STAR. The findings suggest that the certification acts as a substitute for more accurate, but complex energy information. Using the structural model, I find that the opportunity cost of having imperfectly informed consumers in the refrigerator market ranges from $12 to $17 per refrigerator sold.

Suggested Citation

  • 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.
  • Handle: RePEc:nbr:nberwo:20019
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    1. 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, vol. 103(1), pages 220-256, February.
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    Cited by:

    1. repec:bla:econom:v:84:y:2017:i:333:p:16-33 is not listed on IDEAS
    2. Andor, Mark & Gerster, Andreas & Sommer, Stephan, 2016. "Consumer Inattention and Decision Heuristics: The Causal Effects of Energy Label Elements," Annual Conference 2016 (Augsburg): Demographic Change 145778, Verein für Socialpolitik / German Economic Association.
    3. Kubo, Kensuke & Watanabe, Mariko & Kojima, Michikazu, 2016. "Should energy efficiency be traded off for other product attributes? : an analysis of air-conditioner regulation in Japan," IDE Discussion Papers 607, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    4. repec:eee:jeeman:v:92:y:2018:i:c:p:344-359 is not listed on IDEAS
    5. Kahn, Matthew E. & Walsh, Randall, 2015. "Cities and the Environment," Handbook of Regional and Urban Economics, Elsevier.
    6. Andor, Mark & Gerster, Andreas & Sommer, Stephan, 2017. "Consumer inattention, heuristic thinking and the role of energy labels," Ruhr Economic Papers 671, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    7. Ramos, A. & Gago, A. & Labandeira, X. & Linares, P., 2015. "The role of information for energy efficiency in the residential sector," Energy Economics, Elsevier, vol. 52(S1), pages 17-29.
    8. Louis-Gaëtan Giraudet & Sébastien Houde, 2014. "Double moral hazard and the energy efficiency gap," Working Papers hal-01016109, HAL.
    9. Todd Gerarden & Richard G. Newell & Robert N. Stavins, 2015. "Deconstructing the Energy-Efficiency Gap: Conceptual Frameworks and Evidence," American Economic Review, American Economic Association, vol. 105(5), pages 183-186, May.
    10. repec:eee:eneeco:v:72:y:2018:i:c:p:404-415 is not listed on IDEAS
    11. Louis-Gaëtan Giraudet, 2018. "Energy efficiency as a credence good: A review of informational barriers to building energy savings," Working Papers 2018.07, FAERE - French Association of Environmental and Resource Economists.
    12. Wichman, Casey J., 2017. "Information provision and consumer behavior: A natural experiment in billing frequency," Journal of Public Economics, Elsevier, vol. 152(C), pages 13-33.
    13. repec:spr:empeco:v:55:y:2018:i:4:d:10.1007_s00181-017-1327-1 is not listed on IDEAS
    14. repec:eee:eneeco:v:69:y:2018:i:c:p:204-212 is not listed on IDEAS
    15. repec:eee:eneeco:v:63:y:2017:i:c:p:22-30 is not listed on IDEAS
    16. repec:eee:resene:v:52:y:2018:i:c:p:137-152 is not listed on IDEAS
    17. Nicolas Astier, 2016. "Comparative Feedbacks under Incomplete Information," Working Papers hal-01465189, HAL.
    18. repec:eee:eejocm:v:29:y:2018:i:c:p:1-16 is not listed on IDEAS
    19. repec:eee:ecolec:v:148:y:2018:i:c:p:178-210 is not listed on IDEAS
    20. Jacobsen, Grant D., 2015. "Do energy prices influence investment in energy efficiency? Evidence from energy star appliances," Journal of Environmental Economics and Management, Elsevier, vol. 74(C), pages 94-106.

    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General

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