WP-043: Sébastien Houde and Erica Myers "Are Consumers Attentive to Local Energy Costs? Evidence from the Appliance Market" (February 2019)

We estimate whether consumers respond to local energy costs when purchasing appliances. Using a dataset from an appliance retailer, we compare demand responsiveness to a measure of energy costs that varies with local energy prices versus purchase prices. We strongly reject that consumers are unresponsive to local energy costs under a wide range of assumptions. These findings run counter to the popular wisdom, which motivates energy standards, that energy costs are a shrouded attribute. Capital investments are an important channel for electricity demand response and may explain some of the large differences between short- and long-run electricity price elasticities.