Economics of CFL Subsidies: Consumer Behavior and Market Analysis

This report delves into the economics of CFL subsidies, examining their impact on consumer behavior, market dynamics, and overall welfare. It explores the concept of attentional bias among consumers, analyzing whether subsidies are an effective tool to correct inattentive behavior and promote the adoption of energy-efficient CFL bulbs. The report analyzes the welfare effects of subsidies, illustrating how they influence consumer and producer surpluses, and assesses the potential for deadweight loss. Furthermore, it evaluates the impact of positive externalities associated with CFL consumption, considering how government intervention can address market failures and promote socially efficient outcomes. The analysis covers the effects of subsidies on supply and demand, the role of government in influencing market prices, and the importance of considering consumer biases when designing policy interventions.