Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/216752
Authors: 
Rodemeier, Matthias
Löschel, Andreas
Year of Publication: 
2020
Series/Report no.: 
ZEW Discussion Papers 20-019
Abstract: 
How much information should governments reveal to consumers if consumption choices have uninternalized consequences to society? How does an alternative tax policy compare to information disclosure? We develop a price theoretic model of information design that allows empiricists to identify the welfare effects of any arbitrary information policy. Based on this model, we run a natural field experiment in cooperation with a large European appliance retailer and randomize information regarding the financial benefits of energy-efficient household lighting among more than 640,000 subjects. We find that full information disclosure strongly decreases demand for energy efficiency, while partial information disclosure increases demand. More information reduces social welfare because the increase in consumer surplus is outweighed by the rise in environmental externalities. By randomizing product prices, we identify the optimal tax vector as an alternative policy and show that sizable taxes on energy-inefficient products yield larger welfare gains than any information policy. We also document an important policy interaction: information provision dramatically reduces attention to pecuniary incentives and thereby limits the effectiveness of taxes.
Subjects: 
persuasion
optimal taxation
internality taxes
field experiments
energy efficiency
behavioral public economics
JEL: 
D61
D83
H21
Q41
Q48
Document Type: 
Working Paper

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