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

Sébastien Houde and Erica Myers

Journal of Public Economics, 2021, vol. 201, issue C

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.

Keywords: Inattention; Shrouded attributes; Energy efficiency gap; Carbon pricing; Electricity rate design (search for similar items in EconPapers)
JEL-codes: D12 D83 L15 Q41 Q50 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Working Paper: Are Consumers Attentive to Local Energy Costs? Evidence from the Appliance Market (2019)
Working Paper: Are Consumers Attentive to Local Energy Costs? Evidence from the Appliance Market (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:201:y:2021:i:c:s004727272100116x

DOI: 10.1016/j.jpubeco.2021.104480

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