Behavioral Anomalies and Energy-Related Individual Choices: The Role of Status-Quo Bias

CER-ETH Working Paper 18/300

38 Pages Posted: 16 Nov 2018

See all articles by Julia Blasch

Julia Blasch

Centre for Energy Policy and Economics

Claudio Daminato

Lund University; ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich

Date Written: October 23, 2018

Abstract

The literature on the energy-efficiency gap discusses the status-quo bias as a behavioral anomaly that potentially increases the energy consumption of a household through at least three channels: (1) by making consumers keep their energy-using durables as long as possible, until wearout forces them to replace their equipment (2) by making consumers choose new energy-using durables that resemble the existent ones that need replacement, and (3) by making consumers overuse appliances in an attempt to mentally amortize the initial investment cost. The results presented in this study are an attempt to empirically investigate the extent to which the presence of a bias towards the status quo is linked to residential electricity consumption through two out of the above mentioned three channels: non-replacement of old appliances and overuse of appliances. Using data from a large household survey conducted in three European countries, we find that our measure of status-quo bias is a significant predictor of both the age of home appliances as well as the level of consumption of energy services of a household. The tendency of status-quo biased individuals to keep their appliances longer and to use them more intensely is also reflected in the total electricity consumption of their households, which is found to be around 5.7% higher than for households of non-biased individuals. This research thus provides some first empirical evidence that the status-quo bias has the potential to create a substantial barrier to increasing residential energy efficiency. Our findings prompt policy makers to design instruments that take this barrier into account.

Keywords: status-quo bias; loss aversion; appliances replacement; residential energy consumption; energy-related financial literacy

JEL Classification: D12, D91, Q41, Q50

Suggested Citation

Blasch, Julia and Daminato, Claudio, Behavioral Anomalies and Energy-Related Individual Choices: The Role of Status-Quo Bias (October 23, 2018). CER-ETH Working Paper 18/300, Available at SSRN: https://ssrn.com/abstract=3272245 or http://dx.doi.org/10.2139/ssrn.3272245

Julia Blasch (Contact Author)

Centre for Energy Policy and Economics ( email )

Zürichbergstrasse 18
Zurich, 8092
Switzerland

Claudio Daminato

Lund University ( email )

Box 117
Lund, SC Skane S221 00
Sweden

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich ( email )

Zürichbergstrasse 18
Zurich, 8092
Switzerland

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