L abels certify that a product meets some standard for quality, but often consumers are unsure of the exact standard that the label represents. Focusing on the case of ecolabels for environmental quality, we show how even small amounts of uncertainty can create consumer confusion that reduces or eliminates the value to firms of adopting voluntary labels. First, consumers are most suspicious of a label when a product with a bad reputation has it, so labels are often unpersuasive at showing that a seemingly bad product is actually good. Second, label proliferation aggravates the effect of uncertainty, causing the informativeness of labels to decrease rather than increase. Third, uncertainty makes labeling and nonlabeling equilibria more likely to coexist as the number of labels increases, so consumers face greater strategic uncertainty over how to interpret the presence or absence of a label. Finally, a label can be legitimitized or spoiled for other products when a product with a good or bad reputation displays it, so firms may adopt labels strategically to manipulate such information spillovers, which further exacerbates label confusion. Managers can reduce label confusion by supporting mandatory labeling or by undertaking investments to make certain labels "focal."
We investigate the effects of carbon reduction labels using a detailed scanner data set. Using a difference-in-differences estimation strategy, we find that having a carbon label has no impact on detergent prices or demand. We also investigate possible heterogeneous effects of carbon labels using the synthetic control method. We find no evidence to indicate that the prices for the counterfactual detergents without the label would have been any different from the prices of the carbon-labeled detergents. We investigate the reasons for these results and conclude that the specific design of the carbon label is responsible for its lack of success. (JEL D12, D83, L15, Q54)
To maintain energy balance in the grid, energy flexibility is entailed at consumer side. Generally, the participants of demand response experiments are offered economic incentive with historic or normative feedback on their energy consumption. In this article, we present an energy flexibility experiment concerning residential sector, which is based on nudge signals with indirect feedback and no monetary incentive. The results show that nudge signal can serve as an important tool to implement energy flexibility without hindering consumer's comfort. This study is effective to implement energy flexibility on local energy communities while offering no direct economic incentive.
Key Innovations Load curtailment and load shifting alerts are conceived for the residential buildings based on the day ahead forecasted condition of national grid. Nudge cocktail (a collection of nudge signals) is devised for sending alerts to the participants. The participants may respond to each alert according to their degree of flexibility without loss of comfort. Reference load curve is formulated for each participant. An image of reference load curve superposed on measured load curve is sent to the subjects as indirect feedback.
Practical ImplicationsThe study is significant for energy flexibility of residential sector to mitigate forecasted day ahead energy imbalance in the grid. The load shifting alerts are based on the historic consumption of same sector, which enables the participant to implement energy flexibility according to their degree of flexibility without any loss of comfort.
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