Full Title: Consumer Inattention and Demand for Energy Cost Savings
Author(s): Benjamin Leard
Publisher(s): Resources For the Future
Publication Date: August 1, 2017
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Description (excerpt):
Consumer undervaluation of energy cost savings is a common explanation for the energy efficiency gap, where markets fail to adopt fuel-saving technologies even though the value of energy savings exceeds the costs. This paper presents empirical evidence on the relationship between a potential source of undervaluation – consumer inattention – and demand for energy-efficient products. Using survey data on respondents’ attention to automobile fuel costs, attribute preferences, and discrete choice experiments, I find heterogeneity in inattention toward and willingness to pay for fuel cost savings. Estimates from discrete choice models suggest that inattentive consumers undervalue fuel cost savings and attentive consumers fully value these savings. The results imply that designing energy efficiency policies requires careful consideration of consumer inattention.