IDEAS home Printed from https://ideas.repec.org/p/eth/wpswif/26-408.html

Projection Bias in Durable Goods Investment: Evidence from Solar Panel Adoption in Norway

Author

Listed:
  • Massimo Filippini

    (Center of Economic Research, Department of Management, Technology, and Economics, ETH Zurich; Università della Svizzera Italiana)

  • Cloé Garnache

    (Center of Economic Research, Department of Management, Technology, and Economics, ETH Zurich; Housing Lab, Oslo Metropolitan University)

Abstract

This paper examines how projection bias—the tendency to over-extrapolate current conditions into the future—shapes household investment in durable goods. Using municipality-level data and a sharp regional electricity price divergence within Norway during the 2022–2023 European energy crisis, we estimate the causal effect of the price shock on residential rooftop solar panel adoption. Municipalities exposed to high electricity prices saw a 556% yearly average increase in new solar capacity and a 458% yearly increase in solar installations relative to unexposed municipalities. Second, we estimate the projection bias using an approach combining reduced-form causal identification with a parsimonious structural model to interpret quasi-experimental estimates. We find that households put about 70% weight on current prices when evaluating long-run profitability. Our findings provide suggestive evidence that projection bias can influence rational investment criteria, with implications for microeconomic theory and policy.

Suggested Citation

  • Massimo Filippini & Cloé Garnache, 2026. "Projection Bias in Durable Goods Investment: Evidence from Solar Panel Adoption in Norway," CER-ETH Economics working paper series 26/408, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    • Handle: RePEc:eth:wpswif:26-408
    as

    Download full text from publisher

    File URL: https://ethz.ch/content/dam/ethz/special-interest/mtec/cer-eth/cer-eth-dam/documents/working-papers/wp-26-408.pdf
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eth:wpswif:26-408. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge The email address of this maintainer does not seem to be valid anymore. Please ask the person in charge to update the entry or send us the correct address (email available below). General contact details of provider: https://edirc.repec.org/data/iwethch.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.