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Are consumers attentive to local energy costs? Evidence from the appliance market

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  • Houde, Sébastien
  • Myers, Erica

Abstract

We estimate whether consumers respond to local energy costs when purchasing appliances. Using a dataset from an appliance retailer, we compare demand responsiveness to a measure of energy costs that varies with local energy prices versus purchase prices. We cannot reject that consumers respond to lifetime energy costs in the same way they respond to purchase prices under a wide range of assumptions. These findings run counter to the popular wisdom, which motivates energy standards, that energy costs are systematically undervalued due to various behavioral phenomena. They imply that electricity pricing that deviates from social marginal costs, due to failure to incorporate pollution externalities or due to other features in rate design, can have substantial distortionary effects on demand.

Suggested Citation

  • Houde, Sébastien & Myers, Erica, 2021. "Are consumers attentive to local energy costs? Evidence from the appliance market," Journal of Public Economics, Elsevier, vol. 201(C).
  • Handle: RePEc:eee:pubeco:v:201:y:2021:i:c:s004727272100116x
    DOI: 10.1016/j.jpubeco.2021.104480
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    Cited by:

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    2. Fetzer, Thiemo & Gazze, Ludovica & Bishop, Menna, 2022. "How large is the energy savings potential in the UK?," CAGE Online Working Paper Series 644, Competitive Advantage in the Global Economy (CAGE).
    3. Axel Gautier & Julien Jacqmin, 2020. "PV adoption: the role of distribution tariffs under net metering," Journal of Regulatory Economics, Springer, vol. 57(1), pages 53-73, February.
    4. Kiso, Takahiko & Chan, H. Ron & Arino, Yosuke, 2022. "Contrasting effects of electricity prices on retrofit and new-build installations of solar PV: Fukushima as a natural experiment," Journal of Environmental Economics and Management, Elsevier, vol. 115(C).
    5. Giovanna d’Adda & Yu Gao & Massimo Tavoni, 2022. "A randomized trial of energy cost information provision alongside energy-efficiency classes for refrigerator purchases," Nature Energy, Nature, vol. 7(4), pages 360-368, April.
    6. E. Denny, 2022. "Long-term Energy Cost Labelling for Appliances: Evidence from a Randomised Controlled Trial in Ireland," Journal of Consumer Policy, Springer, vol. 45(3), pages 369-409, September.

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    More about this item

    Keywords

    Inattention; Shrouded attributes; Energy efficiency gap; Carbon pricing; Electricity rate design;
    All these keywords.

    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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