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Habit Formation and Consumption of Energy for Heating: Evidence from a Panel of Danish Households

In this paper we ask if consumption of energy for space heating by households is habit forming. A model of intertemporal consumption allocation allowing for habit-forming preferences is estimated on a register-based panel data set with high quality information about consumption of natural gas for a sample of Danish households. Results indicate that preferences are weakly habit forming.

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Energy Specializations: Energy Modeling – Energy Data, Modeling, and Policy Analysis; Natural Gas – Markets and Prices; Electricity – Markets and Prices

JEL Codes:
E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination
L13 - Oligopoly and Other Imperfect Markets
D42 - Market Structure, Pricing, and Design: Monopoly

Keywords: Space heating, Intertemporal consumption, habit formation, household energy, panel data, Denmark

DOI: 10.5547/ISSN0195-6574-EJ-Vol28-No2-2

Published in Volume 28, Number 2 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.