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

Abstract

The literature on the energy-efficiency gap discusses the status-quo bias as a behavioral anomaly that potentially increases a household’s energy consumption. We empirically investigate the extent to which the status-quo bias is linked to residential electricity consumption through two 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 and the level of a household’s consumption of energy services. This is reflected in the total electricity consumption, which is found to be around 5.7% higher when the household head is status-quo biased. We thus provide empirical evidence that the status-quo bias may represent 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, energy efficiency, residential energy consumption, energy-related financial literacy

JEL Classification: D12, D91, Q41, Q50