Are Consumers Attentive to Energy Costs When Adopting Energy Efficiency Products? Accounting for Durability

I estimate the extent to which consumers respond to energy costs when purchasing energy-using durables, when product-specific lifetime is provided and considered. Using market- level transaction data for lightbulbs, I compare consumer demand responses to the local annual energy cost versus the annual cost over the life of the appliance that has the same present value as the up-front purchase price – the “levelized annual cost of ownership” (LACO). I find consumers are significantly inattentive to energy costs when purchasing lightbulbs. This holds for “average” consumers and consumers across the income and education spectrum; and even holds under a wide range of assumptions on discount rates and durability, including two extreme cases in which consumers overestimate or underestimate the lightbulb lifetime. In addition, accounting for a specific lifetime provides significantly different estimates from those estimated using a fixed average lifetime. These findings have implications for information-based policies, and for subsidies for energy-efficient durables generally