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Work in Progress |
| The Energy Star certification is a voluntary labeling program managed by the US Environmental Protection Agency (EPA) that favors the adoption of energy efficient products. I use unique micro-data on the US refrigerator market to show that consumers respond to certification in different ways. Some consumers appear to rely heavily on Energy Star and pay little attention to electricity costs, others are the reverse, and still others appear to be insensitive to both electricity costs and Energy Star. I then develop a structural model of demand to capture the degree of sophistication with which consumers account for the energy efficiency attribute. My results suggest that the Energy Star program for the US refrigerator market leads to energy savings, but has uncertain effects on social welfare. Three factors contribute to this finding. On one hand, the Energy Star certification may increase the perceived quality of the certified products and induce consumers to invest too much in energy efficiency. On the other hand, the Energy Star certification partly crowds out efforts to fully account for energy costs and induces consumers to invest too little in energy efficiency. This effect may even dominate. For a range of not too restrictive parameter values, the Energy Star label may lead to less energy efficient choices on average. I also show that manufacturers' product line and pricing decisions play an important role in determining the sign of the welfare effects. Bunching With the Stars: How Manufacturers Respond to Voluntary Energy Efficiency Standards. In the US, energy efficiency standards are the main policy tool used to address negative externalities associated with the adoption of energy intensive durables. For appliances and consumer electronics, in addition to minimum energy efficiency standards, the Energy Star labeling program sets voluntary standards for manufacturers. The goal of the Energy Star program is to inform consumers about energy efficiency and ultimately accelerate the adoption of the most energy efficient products available in the market. In order to quantify the energy savings associated with the program and the welfare effects, it is of primary importance to understand how manufacturers respond to the program. This paper investigates how the Energy Star program influences manufacturers' product line and pricing decisions. In several markets, we observe that manufacturers locate their products in the energy efficiency characteristics space almost exclusively at the minimum standards and Energy Star standards. This bunching at the standards is consistent with profit maximizing behavior and corresponds to an equilibrium where firms believe that consumers are influenced by the Energy Star program. Interestingly, markets with similar market structure and market participants respond differently to the Energy Star program. For instance, while we observe strong bunching in the refrigerator market, the markets for washing machines and dishwashers are not subject to bunching, although similar firms manufacture these products. In this paper, I formalize the conditions under which bunching at the standards constitutes a market equilibrium, and discuss the implications for the design of voluntary standards and certification programs. Information, Framing and the Adoption of Energy Intensive Durables (with Samuel McClure and Carrie K. Armel) The aim of the paper is to determine the extent to which providing more information and different ways of framing information influence consumers' preferences for energy intensive durables. Principles from behavioral economics are used to develop information frames that increase the salience of energy costs and shift choices toward more energy efficient products. We implement a field experiment in an online store specialized in one particular appliance (refrigerator) to obtain internally valid estimates of the effects of energy information on purchase decisions. The goal of this large field experiment is to inform the design of certification and labeling programs for energy intensive durables. Estimation of US Dynamic Production Functions (with Christopher Timmins and Lawrence Goulder) |