Revisiting Heat Energy Consumption Modeling: Household Production Theory Applied to Field Experimental Data
FCN Working Paper No. 04/2018
34 Pages Posted: 11 Jun 2018
Date Written: April 1, 2018
This paper offers new insights on utility-driven heat energy consumption. The research question addressed is whether economic aspects affect short-term, less conscious behavior in the same way as long-term, more conscious behavior. The model proposed is based on Becker’s household production theory and integrates economic, engineering and behavioral elements. Comparative statics enables an interdisciplinary integration of price- and income functions to cover economic influences, the production function to cover technical influences, and the utility-based choice architecture. Based on a functional representation of the theories, a panel data model of heat energy consumption is estimated. The empirical analysis is based on data from 60 adjacent apartments in South-West Germany. We find empirical evidence that the price elasticity of demand is only statistically significant when using yearly aggregated data. This result provides evidence that occupants apparently do not act upon energy price signals when following their daily home heating routine. In less frequent considerations, as e.g. according to their yearly billing cycles, occupants adjust their heat energy consumption with respect to the fuel price influence. Furthermore, in relation to the other influences on heat energy consumption, we find that the price impact is less pronounced than the impact of comfort conditions.
Keywords: Heat Energy Consumption, Household Production Theory, Price Elasticity of Demand
JEL Classification: D13, Q41, R20
Suggested Citation: Suggested Citation