Weighing Upfront Costs against Future Savings: A Discrete Choice Analysis of Homeowners' Risk-Time Preferences for Energy Efficiency Upgrades

Njideka Aguome, Nonso Ewurum, Phenyo Mpolokang and Fidelis Emoh

AfRES from African Real Estate Society (AfRES)

Abstract: This study employs a discrete choice analysis to investigate homeowners' risk-time preferences for energy efficiency upgrades, considering both upfront costs and future savings. The study's objectives are to understand trade-offs homeowners are willing to make between upfront costs and expected savings for energy efficiency upgrades and to identify the tipping point where homeowners switch preferences between discounted long-term savings and higher upfront costs amongst household demographic characteristics. A quantitative methodology is employed to achieve these objectives, utilising discrete choice analysis. This methodology allows for examining homeowners' preferences by presenting them with various hypothetical scenarios that include different combinations of upfront costs and expected savings for energy efficiency upgrades. Using a dataset of 461 homeowners in Nigeria, we estimate latent class, multinomial logit models, and conjoint analysis to analyse the preference heterogeneity in the population. Our results provide a comprehensive understanding of homeowners' risk-time preferences for energy efficiency upgrades, and the tipping point where they switch preferences between discounted long-term savings and higher upfront costs. The findings elicit insights that direct policymakers to tailor their interventions consistent with demographic variances towards effectively incentivising energy efficiency upgrades.

Keywords: discrete choice experiment; Energy Efficiency; household preferences; smart homes; sustainable transition (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2024-01-01
New Economics Papers: this item is included in nep-dcm and nep-ene
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