Incentives for information provision: Energy efficiency in the Spanish rental market

• Main Authors: BIAN, Xueying, FABRA, Natalia
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2020
• Subjects: Asymmetric information; Energy efficiency; Adoption rate; Rental market; Search; Eastern European Studies; Energy Policy; Real Estate
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/6716; https://ink.library.smu.edu.sg/context/lkcsb_research/article/7715/viewcontent/Incentives_Information_Provision_2020_av.pdf
• Institution: Singapore Management University

In this paper we build a search model with asymmetric information regarding houses' energy efficiency. The objective is to shed light on the house owners' incentives to disclose energy certificates (ECs) in the rental market. Such incentives depend not only on the rent premium for more efficient houses - as previously documented - but also on the implicit rent penalty for unlabeled houses. Interestingly, we show that such a penalty is higher the greater the disclosure rate of ECs in the local market. This suggests that the enforcement of the EC regulation should be more stringent during the early phases, as the boost in the initial disclosure rate would strengthen the incentives for later adoption. We illustrate the theoretical predictions with empirical evidence from the Spanish rental market.