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.
persuasion optimal taxation internality taxes field experiments energy efficiency behavioral public economics