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Energy efficiency, information, and the acceptability of rent increases: A multiple price list experiment with tenants

Ghislaine Lang and Bruno Lanz

No 18-04, IRENE Working Papers from IRENE Institute of Economic Research

Abstract: This paper studies the role of imperfect information and attentional biases in the context of energy efficiency investments in rented properties and associated split incentives. We design a multiple price list experiment representing owners' decision to replace the central heating appliance, and employ both within-subject information disclosure and betweensubject variation in information provision to quantify how tenants trade-off energy efficiency and rent increases. A set of quantile regressions suggests that information on expected energy bills reduction induces around 30% of tenants to equate financial savings and acceptable rent increase. Around 20% of tenants oppose rent increase and do not respond to information, whereas tenants' valuation in the upper tail of the distribution exceeds financial savings, presumably on account of pro-environmental motives. By contrast, information on energy bills variability dampens acceptable rent increase. Our results highlight the importance of realistic ex-ante estimates of financial savings associated with energy efficiency investments.

Keywords: Market failures; Information; Split incentives; Energy efficiency; Environmental policy; Rented properties; Economic experiments; Multiple price lists. (search for similar items in EconPapers)
JEL-codes: Q4 R31 Q5 H23 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ene and nep-exp
Date: 2018-05
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