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Accounting for Elimination-by-Aspects Strategies and Demand Management in Electricity Contract Choice

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Abstract

We report on a discrete choice experiment aimed at eliciting Swedish households' willingness-to-accept a compensation for restrictions on household electricity and heating use during peak hours. When analyzing data from discrete choice experiments, we typically assume that people make rational utility maximizing decisions, i.e., that they consider all of the attribute information and compare all alternatives. However, mounting evidence shows that people use a wide range of simplifying strategies that are inconsistent with utility maximization. We use a flexible model capturing a two-stage decision process. In the fi rst stage, respondents are allowed to eliminate from their choice set alternatives that contain an unacceptable level, i.e., restrictions on the use of heating and electricity. In the second stage, respondents choose in a compensatory manner between the remaining alternatives. Our results show that about half of our respondents choose according to an elimination-by-aspects strategy, and that, on average, they are unwilling to accept any restrictions on heating in the evening or electricity use, irrespective of time-of-day. Furthermore, we nd that considering elimination-by-aspects behavior leads to a downward shift in elicited willingness-to-accept. We discuss implications for policy.

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  • Daniel, Aemiro Melkamu & Persson, Lars & Sandorf, Erlend Dancke, 2017. "Accounting for Elimination-by-Aspects Strategies and Demand Management in Electricity Contract Choice," CERE Working Papers 2017:7, CERE - the Center for Environmental and Resource Economics.
  • Handle: RePEc:hhs:slucer:2017_007
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    File URL: http://www.cere.se/se/forskning/working-papers/872-accounting-for-elimination-by-aspects-strategies-and-demand-management-in-electricity-contract-choice.html
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    Cited by:

    1. Swantje Sundt & Katrin Rehdanz & Jürgen Meyerhoff, 2020. "Consumers’ Willingness to Accept Time-of-Use Tariffs for Shifting Electricity Demand," Energies, MDPI, Open Access Journal, vol. 13(8), pages 1-17, April.
    2. Bernadeta Gołębiowska, 2020. "Preferences for demand side management—a review of choice experiment studies," Working Papers 2020-05, Faculty of Economic Sciences, University of Warsaw.

    More about this item

    Keywords

    Choice experiment; Electricity contract; Willingness-to-accept; Household electricity; Elimination-by-aspects; Two-stage decision;

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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