Energy Cost Information and Consumer Decisions: Results from a Choice Experiment on Refrigerator Purchases in India

Abstract

Appliance labels allow consumers to choose products based on their energy use. In most countries, the widely adopted comparative categorical labels give information on energy use in physical units such as kilowatt-hour. Studies on the impact of monetary cost information on labels have reported different results across appliances within studies, and for the same appliances across studies. Recent studies on refrigerators show that monetary information increases the probability of cost-effectiveness analysis and fosters choice of energy-efficient refrigerators but do not estimate the consumer willingness to pay for higher efficiency category. In a discrete choice experiment, we observe choices of a sample of households divided into groups based on whether they get operating cost information on hypothetical choices. We estimate a mixed logit model with correlated random parameters and estimate the magnitude and distribution of consumer willingness to pay for higher energy efficiency category. We find that energy cost information on labels facilitate comparison of refrigerators based on energy-efficiency and leads to a positive willingness to pay for higher levels of energy efficiency. It also increases the share of respondents having a positive willingness to pay for higher efficiency. We conclude that annual energy cost information on refrigerator labels can improve the effectiveness of labelling policy in India.

ENERGY STAR Appliance Market Shares: Do They Respond to Electricity Prices, and Does It Matter?

“…3. There are two recent experimental studies, Andor et al (2020) for Germany and Jain et al (2021) for India, that test whether consumers respond to labelling information on energy cost savings from more efficient appliances. Both studies find a response, but acknowledge the usual caveats regarding experiments as compared to actual market responses.…”

Energy conservation at home

“…More recently, by framing information on energy labels, researchers have tested ways to correct market and behavioural failures, such as insufficient information and limited attention (Schubert & Stadelmann, 2015), thereby guiding consumers to make energy-efficient and cost-minimising choices. A major strand of literature focuses on the question whether providing energyrelated information in monetary instead of physical units is more effective (Anderson & Claxton, 1982;Blasch et al, 2019;Deutsch, 2010;Greene et al, 2008;Heinzle, 2012;Jain et al, 2021;Stadelmann & Schubert, 2018). These studies demonstrated that disclosing monetary information helps to make operating costs salient and allows consumers to either select the more energy-and cost-efficient appliances or make a trade-off between energy savings and cost savings when the two goals are conflicting.…”

“…The speculated causes of this cross-country difference included the disparity in initial market share, energy literacy, public acceptability of the policies, and the stringency of implementing the policies (Schleich et al, 2021). Also, the effectiveness of disclosing operating costs differs between studies conducted in Norway (Kallbekken et al, 2013), Switzerland (Blasch et al, 2019), and India (Jain et al, 2021), although the discussion on the possible determinants of the cross-country heterogeneity is still lacking.…”