Life Cycle Cost Disclosure, Consumer Behavior, and Business Implications

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SummaryComprehensive assessments of final consumption have identified “housing” as a major contributor to total environmental impacts. Within this category, electrical‐energy‐using products are important. Do consumers opt for more energy‐efficient household appliances if they are provided with life cycle cost (LCC)—that is, the sum of purchase price and operating cost estimated over the life span of the appliance? And what consequences does LCC disclosure have for business? Physical energy figures shown on appliance labels may be cognitively demanding for consumers, whereas monetary information promises to simplify the decision problem. Despite the rising interest in monetary cost disclosure, its effectiveness relative to physical cost disclosure has not been rigorously evaluated. This research approached the question of effectiveness with an online field experiment for washing machines. Customers of a commercially operating online shop were randomly assigned to two groups. The control group was provided with regular product price information; the treatment group received additional LCC information. A total of 2,065 clicks were recorded and analyzed with multiple regression that controlled for several product characteristics. The evidence suggests that LCC disclosure decreases the mean specific energy use of chosen washing machines by 0.8% (p < 0.01) and their mean specific water use by 0.7% (p < 0.05). As to business implications, LCC disclosure had no effect on the indicator of retail volume, which makes it unattractive for retailers to provide LCC on their own initiative.