Market Transformation and Multiple Equilibria

摘要

Current thinking on market transformation is that there is a market equilibrium where consumers make optimal choices with respect to energy efficiency technologies. The reason consumers don't make these optimal choices is because there are market barriers. The policy remedy is to remove these barriers. We suggest instead, that the market is at one of several possible equilibria. Economic theory is rife with multiple equilibria; having a single equilibrium is a comparatively rare phenomena in theory and practice. Some of these equilibria will be stable equilibria that the market "falls into". Viewed from a multiple equilibrium perspective, a good market transformation policy will move the market far enough away from the current equilibrium so that it moves to a different, preferred, equilibrium of it own volition. Policy recommendations under this framework are significantly different and warrant additional consideration.