The Lightbulb Paradox: Evidence from Two Randomized Experiments

Hunt Allcott, Dmitry Taubinsky

NBER Working Paper No. 19713
Issued in December 2013
NBER Program(s):   EEE   PE

Imperfect information and inattention to energy costs are important potential justifications for energy efficiency standards and subsidies. We evaluate these policies in the lightbulb market using a theoretical model and two randomized experiments. We derive welfare effects as functions of reduced-form sufficient statistics capturing economic and psychological parameters, which we estimate using a novel within-subject information disclosure experiment. In the context of the model, the main results suggest that moderate subsidies for energy efficient lightbulbs may increase welfare, but informational and attentional biases alone do not justify a ban on incandescent lightbulbs.

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This paper was revised on August 5, 2014

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Document Object Identifier (DOI): 10.3386/w19713

Published: Evaluating Behaviorally Motivated Policy: Experimental Evidence from the Lightbulb Market Hunt Allcott Dmitry Taubinsky AMERICAN ECONOMIC REVIEW VOL. 105, NO. 8, AUGUST 2015 (pp. 2501-38)

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