Energy efficiency as a credence good: A review of informational barriers to building energy savings

No 2018.04, Policy Papers from FAERE - French Association of Environmental and Resource Economists

Abstract: Information problems have early been suspected to be the main barrier to energy-efficiency investment. I review the vast yet piecemeal research that has been carried out since. Focusing on energy efficiency in buildings, I organize the review around the concept of credence good: just like that of auto repairs or taxi rides, the quality of energy-efficiency measures is never fully revealed to the buyer; as a result, it is subject to multiple information asymmetries. My first contribution is to distinguish symmetric-information problems from information asymmetries. The former arise when information is either incomplete or imperfect, but equally shared by contracting parties; as non-market failures, these can be addressed by technological progress and insurance markets. My second contribution is to give structure to the information asymmetries associated with energy efficiency by disentangling screening, signalling, moral hazard and price discrimination within a variety of contractual relationships involving buyers and sellers, owners and renters, and borrowers and lenders. I find evidence of information asymmetries to be compelling in landlord-tenant relationships, unclear in real estate markets, and scarce in retrofit contracting and financing. I conclude by discussing the intricacies between informational and behavioural problems in energy-efficiency decisions.

Keywords: Energy-efficiency gap; Information asymmetries; Credence goods; Building energy (search for similar items in EconPapers)
JEL-codes: D82 Q41 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2018-04
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http://faere.fr/pub/PolicyPapers/Giraudet_FAERE_PP2018.04.pdf First version, 2018 (application/pdf)

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Working Paper: Energy efficiency as a credence good: A review of informational barriers to building energy savings (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:fae:ppaper:2018.04

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