WP-008: Hunt Allcott and Richard Sweeney, "Can Retailers Inform Consumers about Energy Costs? Evidence from a Field Experiment" (March 2015)

The U.S. and many other countries require energy use information labels for durable goods such as cars, water heaters, and air conditioners. In this study, the researchers compare the effects of information to the effects of customer rebates and sales incentives on demand for energy efficient durables.

The study focuses on water heaters precisely because they are boring – consumers pay little attention to them until they fail. When replacing a water heater, consumers get much of their information from retailers’ sales agents. The researchers partnered with a large nationwide retailer and worked at the retailer’s call center, which sells about 45,000 water heaters a year.  Thousands of calls were randomly assigned to receive different treatments. Sales agents were instructed to provide energy cost savings information and/or offer customer rebates for Energy Star models for some customers. On some calls, sales agents were offered bonuses if they sold an Energy Star model.

The results show that providing energy cost information is highly ineffective at increasing demand for Energy Star models. The authors also found that the sales agents appear to have known this, so they only suggested Energy Star models to the most potentially receptive consumers. In follow-up surveys, most consumers are aware of the energy efficient model and may even overestimate its benefits, which suggests that imperfect information is not a major barrier to adoption in this context. These results highlight the difficulties that retailers face in increasing demand for energy efficient products.