Erica Myers, University of Illinois

Mandatory disclosure policies are implemented broadly despite sparse evidence that they improve market outcomes. We study the effects of requiring home sellers to provide buyers with certified audits of residential energy efficiency. Using similar nearby homes as a comparison group, we find this requirement increases price premiums for energy efficiency and encourages energy-saving investments. We additionally present evidence highlighting the market failure – incomplete information by both buyers and sellers – that prevents widespread voluntary disclosure of energy efficiency in housing transactions. Our findings support that disclosure policies can improve market outcomes in settings with symmetrically incomplete information.

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