Does Better Information Lead to Better Choices? Evidence from Energy-Efficiency Labels

53 Pages Posted: 29 Nov 2014

See all articles by Lucas W. Davis

Lucas W. Davis

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER)

Gilbert E. Metcalf

Tufts University - Department of Economics; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: November 27, 2014

Abstract

Information provision is a key element of government energy-efficiency policy, but the information that is provided is often too coarse to allow consumers to make efficient decisions. An important example is the ubiquitous yellow “EnergyGuide” label, which is required by law to be displayed on all major appliances sold in the United States. These labels report energy cost information based on average national usage and energy prices. We conduct an online randomized controlled trial to measure the potential benefits from providing more accurate information. We find that state-specific labels lead to significantly better choices. Consumers invest about the same amount overall in energy-efficiency, but the allocation is much better with more investment in high-usage high-price states and less investment in low-usage low-price states. The implied aggregate cost savings are larger than any reasonable estimate of the cost of implementing state-specific labels.

Keywords: Energy-Efficiency, Information Provision, Air Conditioning, Energy Demand

JEL Classification: D12, H49, Q41, Q48

Suggested Citation

Davis, Lucas W. and Metcalf, Gilbert E., Does Better Information Lead to Better Choices? Evidence from Energy-Efficiency Labels (November 27, 2014). USAEE Working Paper No. 14-187. Available at SSRN: https://ssrn.com/abstract=2531471 or http://dx.doi.org/10.2139/ssrn.2531471

Lucas W. Davis

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Gilbert E. Metcalf (Contact Author)

Tufts University - Department of Economics ( email )

Medford, MA 02155
United States
617-627-3685 (Phone)
617-627-3917 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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