How Consumers Respond to Product Certification and the Value of Energy Information
Houde, Sébastien. 2017. Moral Hazard and the Energy Efficiency Gap: Theory and Evidence. University of Maryland, Department of Agricultural and Resource Economics Working Papers, WP 17-08.
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I study how consumers respond to competing pieces of information that differ in their degree of complexity and informativeness. In particular, I study the choice of refrigerators in the U.S., where a mandatory disclosure labeling program provides detailed information about energy cost, and a certification labeling program provides a simple binary-star rating related to energy use. I find that the coarse certification may help some consumers to pay attention to energy information, but for others, it may crowd out efforts to process more accurate, but complex, energy information. The effect of the certification on overall energy use is thus ambiguous.