Individual discounting, energy conservation, and household demand for lighting

This paper analyzes household appliance purchase and energy consumption and conservation related to demand for lighting. The behavioral model is estimated using data on consumersʹ choices between various types of electric light bulbs with large differences in purchase costs, operating costs and lifetimes. The model allows the utility attached to energy conservation per se to vary across consumers and explicitly takes into account the random nature of the lifetimes of lamps. Due to the panel nature of the data and the differences between lifetimes of high-efficiency and low-efficiency lamps, the consumerʹs discount rate can be estimated without assuming that he correctly perceive the operating costs. The estimated annual discount rate is about 15 percent, somewhat lower than most estimates is earlier studies.