Are Consumers Attentive to Local Energy Costs? Evidence from the Appliance Market
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.
We would like to thank Meredith Fowlie, Christopher Knittle, Richard Newell, Ryan Kellogg, Kochiro Ito, in addition of numerous seminar participants. The U.S. Department of Energy and the National Science Foundation provided funding for this project through the NBER Economics of Energy Market program. This research is also part of the activities of SCCER CREST, which is financially supported by the Swiss Commission for Technology and Innovation (CTI) / Innosuisse. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.