Harvesting the Low-Hanging Fruit: A Behavioural Study of Energy-Efficient Household Appliance Purchases in India

Abstract

This paper investigates household decision-making behaviour in the market for energy-efficient lighting and household appliances in Delhi, India to study the energy efficiency gap in a behavioural economics framework. In particular, a unique primary dataset of survey responses and incentivised choice experiments is analysed to test whether under-investment in residential energy-efficient technologies is explained by present-biased preferences. A Multiple Price List (MPL) set is employed to compute the standard discount factor, and the present bias and long-run components of a quasi-hyperbolic specification. The results show that individuals who are more patient and less present-biased than the sample average are also more likely to invest in energy-efficient appliances. As expected, time preferences are found to be relevant for larger purchases such as refrigerators but lose some or all of their explanatory power for inexpensive purchase decisions such as light bulbs. While the average household is generally found to exhibit present-biased preferences, more work is needed to quantify its weight relative to other factors that explain the energy efficiency gap.