Boundedly rational consumers, energy and investment literacy, and the display of information on household appliances

Julia Blasch, Massimo Filippini and Nilkanth Kumar

Resource and Energy Economics, 2019, vol. 56, issue C, 39-58

Abstract: It is an ongoing debate how to increase the adoption of energy-efficient light bulbs and household appliances in the presence of the so-called ‘energy efficiency gap’. One measure to support consumers’ decision-making towards the purchase of more efficient appliances is the display of energy-related information in the form of energy-efficiency labels on electric consumer products. Another measure is to educate consumers in order to increase their level of energy and investment literacy. Thus, two questions arise when it comes to the display of energy-related information on appliances: (1) What kind of information should be displayed to enable consumers to make rational and efficient choices? (2) What abilities and prior knowledge do consumers need to possess to be able to process this information? In this paper, using a series of (recursive) bivariate probit models and three samples of 583, 877 and 1375 households from three major Swiss urban areas, we show how displaying information on the future energy consumption of electrical appliances in monetary terms (CHF), rather than in physical units (kWh), increases the probability that an individual makes a calculation and identifies the appliance with the lowest lifetime cost. In addition, our econometric results suggest that individuals with a higher level of energy and, in particular, investment literacy are more likely to perform an optimization rather than relying on a decision-making heuristic. These individuals are also more likely to identify the most (cost-)efficient appliance.

Keywords: Energy-efficiency; Bounded rationality; Energy-using durables; Energy label; Energy literacy; Online randomized controlled trial (search for similar items in EconPapers)
JEL-codes: D12 D80 Q41 Q48 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (55)

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Working Paper: Boundedly rational consumers, energy and investment literacy, and the display of information on household appliances (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:resene:v:56:y:2019:i:c:p:39-58

DOI: 10.1016/j.reseneeco.2017.06.001

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