The goal of this project is to examine the dynamic implications of policies regulating light bulbs. There are two sources of dynamic effects that we plan to investigate. On the consumer side, we would like to explore the potential of dynamic preference changes that arise from policy. In particular, consumers tend to underestimate the long run benefits of installing more efficient lightning. However, with the introduction of regulation, light bulb alternatives become more salient. Does this salience also make consumers more aware of the trade-offs?
On the producers' side, we plan to revisit the so-called "light bulb puzzle" by also studying the decisions in innovation. Since more aggressive light bulb measures have been discussed and introduced, there has been a quick improvement in available technologies to produce light. We would like to explore the channels that prevented such innovations from happening before stricter policy was in force. Can these delays be purely explained from the behavioral inattention on the consumer side?
One of our main questions of interest is to explore the role for government policy in spurring innovation. In particular we are interested in comparing the social and private incentives to invest in light bulb technologies and will consider the question of whether recent innovation in light bulbs would have been likely to happen absent government policy intervention.
Methods and Approach
Using the tools in the field of industrial organization, we will develop an econometric dynamic industry model that takes into account the interaction of consumers and firms to quantify the effects of various policies in a comprehensive fashion. We plan to use detailed consumer data about retail light bulb sales as well as current and past light bulb characteristics.
Contributions to Energy Efficiency
Understanding the dynamic effects of policies related to energy efficiency is an important issue. Such dynamic effects can be potentially relevant and are not always considered in the policy debate. We believe that brining the dynamic effects into the current research, by estimating the impact of energy efficiency programs on innovation, will help inform future energy efficiency program design.