Prices versus Standards and Firm Behavior: Evidence from an Artefactual Field Experiment
Abstract
We conduct an artefactual field experiment in which 164 managers and senior advisors recruited from Swedish industry were presented with a task of maximizing net revenue from
abatement investments under three different but equally stringent environmental policy regimes. We find that investment decisions are strongly influenced by type of policy instrument. Economic instruments and performance standards cause different attentional and judgment biases that are inconsistent with standard economic theory. Inconsistencies are larger with economic policy instruments (tax and subsidy) than with performance standards even though subjects’ attention to cost minimization was greater with economic instruments than under performance standards.
Other description
JEL: C93, H32, L20
Collections
Date
2017-01Author
Hennlock, Magnus
Löfgren, Åsa
Wollbrant, Conny
Keywords
artefactual field experiment
bounded rationality
attentional bias
investment inefficiencies
firm
regulation
policy
Publication type
report
ISSN
1403-2465
Series/Report no.
Working Papers in Economics
687
Language
eng