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Electricity Conservation: Consumer Rationality Versus Prospect Theory

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  • PETER C. MAYER

Abstract

Research supports the efficacy of prospect theory over utility maximization for consumer investment in electricity saving equipment. The findings have implications for designing electric utility programs to promote electricity conservation. Prospect theory describes, explains and organizes consumer behavior that is contrary to consumers maximizing a stable utility function. The results are similar across three ethnic groups.

Suggested Citation

  • Peter C. Mayer, 1995. "Electricity Conservation: Consumer Rationality Versus Prospect Theory," Contemporary Economic Policy, Western Economic Association International, vol. 13(2), pages 109-118, April.
    • Handle: RePEc:bla:coecpo:v:13:y:1995:i:2:p:109-118
    DOI: 10.1111/j.1465-7287.1995.tb00747.x
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    Cited by:

    1. Levy, Haim & Levy, Moshe, 2002. "Experimental test of the prospect theory value function: A stochastic dominance approach," Organizational Behavior and Human Decision Processes, Elsevier, vol. 89(2), pages 1058-1081, November.
    2. Edwards, Kimberley D., 1996. "Prospect theory: A literature review," International Review of Financial Analysis, Elsevier, vol. 5(1), pages 19-38.
    3. Heutel, Garth, 2019. "Prospect theory and energy efficiency," Journal of Environmental Economics and Management, Elsevier, vol. 96(C), pages 236-254.
    4. Hall, Darwin C., 1998. "Albedo and vegetation demand-side management options for warm climates," Ecological Economics, Elsevier, vol. 24(1), pages 31-45, January.
    5. Häckel, Björn & Pfosser, Stefan & Tränkler, Timm, 2017. "Explaining the energy efficiency gap - Expected Utility Theory versus Cumulative Prospect Theory," Energy Policy, Elsevier, vol. 111(C), pages 414-426.

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