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Labeling energy cost on light bulbs lowers implicit discount rates

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  • Min, Jihoon
  • Azevedo, Inês L.
  • Michalek, Jeremy
  • de Bruin, Wändi Bruine

Abstract

Lighting accounts for nearly 20% of overall U.S. electricity consumption and 18% of U.S. residential electricity consumption. A transition to alternative energy-efficient technologies could reduce this energy consumption considerably. To quantify the influence of factors that drive consumer choices for light bulbs, we conducted a choice-based conjoint field experiment with 183 participants. We estimated discrete choice models from the data, and found that politically liberal consumers have a stronger preference for compact fluorescent lighting technology and for low energy consumption. Greater willingness to pay for lower energy consumption and longer life was observed in conditions where estimated operating cost information was provided. Providing estimated annual cost information to consumers reduced their implicit discount rate by a factor of five, lowering barriers to adoption of energy efficient alternatives with higher up-front costs; however, even with cost information provided, consumers continued to use implicit discount rates of around 100%, which is larger than that experienced for other energy technologies.

Suggested Citation

  • Min, Jihoon & Azevedo, Inês L. & Michalek, Jeremy & de Bruin, Wändi Bruine, 2014. "Labeling energy cost on light bulbs lowers implicit discount rates," Ecological Economics, Elsevier, vol. 97(C), pages 42-50.
    • Handle: RePEc:eee:ecolec:v:97:y:2014:i:c:p:42-50
    DOI: 10.1016/j.ecolecon.2013.10.015
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