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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.

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Keywords: Energy efficiency, Appliance labelling, Willingness to pay, Energy cost information, Discrete choice model

DOI: 10.5547/01956574.42.2.mjai

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Published in Volume 42, Number 2 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.

 

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