Household responses to winter heating costs: Implications for energy pricing policies and demand-side alternatives

I conduct a survey that presents research subjects with hypothetical costs to adjust their thermostats. I estimate responses to the cost of heating and analyze the causes for heterogeneity in household demand for energy services using the survey results as a complete-information baseline. I find that even at the highest price level ($8 per 5 °F or 2.8 °C), half of the participants exhibit zero response to price. On average, a 100 percent increase in the marginal cost of heating the home induces a 0.31 to 0.97 degree Fahrenheit (0.17 to 0.51 °C) reduction in the winter heating level, corresponding to a −0.005 to −0.014 elasticity. Further, I find that participants’ survey behavior with complete information can explain observed real-world temperature settings, suggesting a limited role for informational barriers or salience issues in energy-service demand heterogeneity. Inelastic demand suggests that energy efficiency policies may have high returns and that centralized demand–response policies may be required to address winter energy emergencies.