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Are Consumers Attentive to Local Energy Costs? Evidence from the Appliance Market

Author

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  • Sebastien Houde

    (ETH Zurich, Switzerland)

  • Erica Myers

    (University of Illinois, United States of America)

Abstract

We estimate whether consumers respond to local energy costs when purchasing appliances. Using a dataset from an appliance retailer, we compare demand responsiveness to a measure of energy costs that varies with local energy prices versus purchase prices. We strongly reject that consumers are unresponsive to local energy costs under a wide range of assumptions. These findings run counter to the popular wisdom, which motivates energy standards, that energy costs are a shrouded attribute. Capital investments are an important channel for electricity demand response and may explain some of the large differences between short and long run electricity price elasticities.

Suggested Citation

  • Sebastien Houde & Erica Myers, 2019. "Are Consumers Attentive to Local Energy Costs? Evidence from the Appliance Market," CER-ETH Economics working paper series 19/313, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    • Handle: RePEc:eth:wpswif:19-313
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    Cited by:

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    2. Anne Kesselring, 2023. "Willingness-to-Pay for Energy Efficiency: Evidence from the European Common Market," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 86(4), pages 893-945, December.
    3. Giovanna d’Adda & Yu Gao & Massimo Tavoni, 2022. "A randomized trial of energy cost information provision alongside energy-efficiency classes for refrigerator purchases," Nature Energy, Nature, vol. 7(4), pages 360-368, April.
    4. Blind, Knut & Kenney, Martin & Leiponen, Aija & Simcoe, Timothy, 2023. "Standards and innovation: A review and introduction to the special issue," Research Policy, Elsevier, vol. 52(8).
    5. E. Denny, 2022. "Long-term Energy Cost Labelling for Appliances: Evidence from a Randomised Controlled Trial in Ireland," Journal of Consumer Policy, Springer, vol. 45(3), pages 369-409, September.
    6. Fetzer, Thiemo & Gazze, Ludovica & Bishop, Menna, 2022. "Distributional and climate implications of policy responses to the energy crisis: Lessons from the UK," CAGE Online Working Paper Series 644, Competitive Advantage in the Global Economy (CAGE).
    7. Axel Gautier & Julien Jacqmin, 2020. "PV adoption: the role of distribution tariffs under net metering," Journal of Regulatory Economics, Springer, vol. 57(1), pages 53-73, February.
    8. Kiso, Takahiko & Chan, H. Ron & Arino, Yosuke, 2022. "Contrasting effects of electricity prices on retrofit and new-build installations of solar PV: Fukushima as a natural experiment," Journal of Environmental Economics and Management, Elsevier, vol. 115(C).
    9. Alberini, Anna & Ščasný, Milan & Czajkowski, Mikolaj & Bigano, Andrea, 2023. "Volatile energy markets, consumers and energy price expectations," Energy Economics, Elsevier, vol. 126(C).

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    More about this item

    Keywords

    inattention; shrouded attributes; energy efficiency gap; misperceptions; appliance efficiency standards;
    All these keywords.

    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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