Can Standards Increase Consumer Welfare? Evidence from a Change in Clothes Washer
- North Carolina State Univ., Raleigh, NC (United States)
- North Carolina State Univ., Raleigh, NC (United States); Univ. of Hawaii, Manoa, HI (United States)
- Lawrence Berkeley National Lab. (LBNL), Berkeley, CA (United States)
We study prices and sales of individual clothes washer models before, during and after a 2007 standard that banned manufacture (but not sale) of low-e ciency units and increased the threshold for Energy Star certi cation. While quantities sold of washer models banned from manufacture decreased sharply, prices for banned models increased only modestly. At the same time, sales of higher-e ciency units rose markedly while prices for high-e ciency units declined. On average, washer e ciency increased but prices changed little. A simple welfare analysis indicates that consumer welfare loss from banned washers was far outweighed by gains from lower-priced high-e ciency units. While a full cost-bene t analysis is not feasible with the available data, we estimate a lower-bound gain in consumer surplus equal to 6-16 percent of total sales. This result may accord with earlier theoretical research that shows quality standards can increase welfare in monopolistically competitive industries that possess increasing returns to scale (Ronnen, 1991). Thus, if energy e ciency is a close proxy for quality, energy e ciency standards may increase competition, market e ciency and welfare.
- Research Organization:
- Lawrence Berkeley National Lab. (LBNL), Berkeley, CA (United States)
- Sponsoring Organization:
- USDOE Office of Science (SC)
- DOE Contract Number:
- AC02-05CH11231
- OSTI ID:
- 1172251
- Report Number(s):
- LBNL-6024E
- Country of Publication:
- United States
- Language:
- English
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