The Energy Paradox Revisited: Analyzing the Role of Individual Differences and Framing Effects in Information Perception

Abstract

In the ongoing debate about the “energy paradox”, a recent stream of literature highlights the importance of behavioural anomalies such as bounded rationality and self-control problems. However, the role of individual-level factors in explaining the energy paradox is still not fully understood. Combining literature on behavioural anomalies and consumer heterogeneity, the current paper analyses how individual differences influence the perception of energy-related information and susceptibility to choice-framing effects. A choice-based conjoint experiment about energy-saving home improvements was conducted with 363 homeowners in Switzerland. Results show that numeracy and energy literacy have no influence on how much attention individuals pay to energy cost savings. However, impulsivity and risk aversion are found to significantly impact homeowners’ weighting of future energy cost savings. Further, it is found that impulsive homeowners are significantly more susceptible to energy cost-framing effects. A key implication for consumer policy is that general educational programs targeted at enhancing citizens’ knowledge and cognitive abilities are unlikely to increase energy conservation investments. The findings further suggest that consumer policies and business models aimed at reducing impulsiveness and influencing risk perception might foster the uptake of energy-saving measures in the residential housing sector.

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Fig. 1

Notes

  1. 1.

    For a discussion of alternative models of risk aversion, see e.g., Rabin and Thaler (2001).

  2. 2.

    The survey included another question on expectations of future gas prices. However, we do not include this in the analysis because of multicollinearity concerns (significant bivariate correlation coefficient).

  3. 3.

    To identify such fraudulent participants, the questionnaire contained a simple check of participants’ attention in the form of the following statement: “This is a little test to check whether you are paying attention. Please select the word ‘energy’ from the following list.” Four response options were given (“energy”, “environment”, “building”, and “policy”).

  4. 4.

    https://www.bfs.admin.ch/bfs/de/home/statistiken/bau-wohnungswesen/.

  5. 5.

    The multi-collinearity table is not included here for reasons of brevity.

  6. 6.

    Results not reported here for reasons of brevity.

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Acknowledgements

We thank two anonymous reviewers for their constructive feedback on an earlier version of this paper.

Funding Information

The authors thank the Swiss Federal Office of Energy for funding the survey described in this research article. The research is part of the activities of SCCER CREST (Swiss Competence Center for Energy Research), which is financially supported by the Swiss Commission for Technology and Innovation (CTI) under Grant No. 466 KTI.2014.0114.

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Correspondence to Samdruk Dharshing or Stefanie Lena Hille.

Appendices

Appendix A

Table 3 Numeracy questionnaire

Appendix B

Table 4 Energy literacy questionnaire

Appendix C

Table 5 Impulsivity

Appendix D

Table 6 Risk preference

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Dharshing, S., Hille, S.L. The Energy Paradox Revisited: Analyzing the Role of Individual Differences and Framing Effects in Information Perception. J Consum Policy 40, 485–508 (2017). https://doi.org/10.1007/s10603-017-9361-0

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Keywords

  • Household behaviour
  • Energy conservation
  • Numeracy
  • Energy literacy
  • Time preferences
  • Cost framing
  • Consumer policy