Residential energy consumption: Models of consumer behavior and their implications for rate design

Friedman, Lee S.; Hausker, Karl

doi:10.1007/bf00411952

Cited by 16 publications

(4 citation statements)

References 9 publications

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“…Empirically testing bounded rationality is even more difficult, for there is no single consensus model of bounded rationality in energy decision making (Sanstad & Howarth 1994). Friedman & Hausker (1988) developed a theoretical model using a particular structure of bounded rationality in which consumers do not have the ability to optimize their energy consumption in response to a tiered-rate structure of electricity prices. The model indicates that consumers will overconsume energy if the rate structure is increasing and underconsume if it is decreasing.…”

Section: Behavioral Failuresmentioning

confidence: 99%

Energy Efficiency Economics and Policy

Gillingham

Newell

Palmer

2009

Annu. Rev. Resour. Econ.

637

359

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Energy efficiency and conservation are considered key means for reducing greenhouse gas emissions and achieving other energy policy goals, but associated market behavior and policy responses have engendered debates in the economic literature. We review economic concepts underlying consumer decision making in energy efficiency and conservation and examine related empirical literature. In particular, we provide an economic perspective on the range of market barriers, market failures, and behavioral failures that have been cited in the energy efficiency context. We assess the extent to which these conditions provide a motivation for policy intervention in energyusing product markets, including an examination of the evidence on policy effectiveness and cost. Although theory and empirical evidence suggests there is potential for welfare-enhancing energy efficiency policies, many open questions remain, particularly relating to the extent of some key market and behavioral failures.

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Section: Behavioral Failuresmentioning

confidence: 99%

Energy Efficiency Economics and Policy

Gillingham

Newell

Palmer

2009

Annu. Rev. Resour. Econ.

637

359

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“…The problem is that the "as-if" point-of-view loses its rationale in the context of policy; the choice situation as seen by the decision-maker has substantial implications for the design (or obviation) of policy interventions. The importance of this issue has been discussed by Kunreuther (1976) and by Friedman and Hausker (1988); we will illustrate it with a germane example.…”

mentioning

confidence: 79%

On the economic analysis of problems in energy efficiency: Market barriers, market failures, and policy implications

Levine¹

1993

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In his recent paper in The Energy Journal, Ronald Sutherland argues that several so-called "market barriers" to energy efficiency frequently cited in the literature are not market failures in the conventional sense and are thus irrelevant for energy policy. We argue that Sutherland has inadequately analyzed the idea of market barrier and misrepresented the policy implications of microeconomics. We find that economic theory, correctly interpreted, does not provide for the categorical dismissal of market barriers. We explore important methodological issues underlying the debate over market barriers, and discuss the importance of reconciling the findings of non-economic social sciences with the economic analysis of energy demand and consumer decision-making. We also scrutinize Sutherland's attempt to apply finance theory to rationalize high implicit discount rates observed in energy-related choices, and find this use of finance theory to be inappropriate.

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“…28 The behavioural approach has been used for another electricity problem, that of understanding tiered rates. For an exposition of the problem, see Friedman and Hausker (1988). For an econometric investigation of it, see Friedman (2002).…”

Section: Continuing Policy Considerationsmentioning

confidence: 99%

The long and the short of it: California's electricity crisis

Friedman

2009

IJPP

Self Cite

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Unexpected problems sometimes arise when governments attempt to introduce competition. The problem considered herein is market power and its exercise during the California electricity crisis of 2000-2001. In introducing competition, both transitional and long-run opportunities for firms to exercise market power may arise. California had transitional rules that severely limited participation of its utilities in forward markets and enhanced the market power of new generating entities. The transitional problems could have been avoided, but in the long-run a smaller market power issue should be expected to arise stochastically. This analysis suggests a new long-run institutional policy role: continual regulatory oversight of an industry that could be workably competitive most of the time. This explains why an agency like the Federal Energy Regulatory Commission should have a permanent Office of Market Monitoring. It also suggests why, in some electricity markets, stochastic market power events may arise before capacity gets strained.

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Residential energy consumption: Models of consumer behavior and their implications for rate design

Cited by 16 publications

References 9 publications

Energy Efficiency Economics and Policy

Energy Efficiency Economics and Policy

On the economic analysis of problems in energy efficiency: Market barriers, market failures, and policy implications

The long and the short of it: California's electricity crisis

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