Intertemporal Choices regarding Sustainable Energy Consumption - Conceptual and Experimental Insights from the Residential Sector
Type
doctoral thesis
Date Issued
2010
Author(s)
Kaenzig, Josef
Abstract
Higher initial costs are a major barrier for environmentally sound innovations (eco-innovations) such as solar thermal collectors, photovoltaics, and energy-efficient appliances. Understanding customer choices and the underlying decision-making processes regarding eco-innovations are key factors for their successful promotion. Many eco-innovations reduce resource consumption during use, resulting in a reduction of operating costs and dependency on resource imports. Today, marketing for these products heavily emphasizes initial costs whilst the reduced operating costs are often not fully considered by consumers. Consumer investment decisions for products and services with higher initial costs and lower operating costs are potentially subject to heuristics and cognitive biases, such as present biased preferences and framing effects.
This doctoral thesis provides a conceptual framework for categorizing different cost profiles of eco-innovations and their corresponding customer segments. The framework considers reference points and reference prices, which are concepts used in prospect theory and theories on mental accounting. Hypotheses on the decision-making process for eco-innovations are derived from a rational choice and behavioral perspective. Literature review, conceptual contributions, as well as the original empirical work on heating equipment and electricity products are used to investigate customer preferences and decision-making processes for sustainable energy consumption in the residential sector. Choice experiments show how offering comparative life cycle cost (LCC) information increases the likelihood that heating equipment with lower operating costs will be chosen. This doctoral thesis concludes that marketing efforts should focus on lowering perceived initial costs and on the specific preferences of various customer segments, rather than finding ways to make customers invest more for environmentally sound innovations. This research establishes promising strategies to render eco-innovations attractive and affordable to customers beyond the niche. Better dissemination and consideration of LCC information provides an important base for long-term thinking on the individual, corporate, and policy level.
This doctoral thesis provides a conceptual framework for categorizing different cost profiles of eco-innovations and their corresponding customer segments. The framework considers reference points and reference prices, which are concepts used in prospect theory and theories on mental accounting. Hypotheses on the decision-making process for eco-innovations are derived from a rational choice and behavioral perspective. Literature review, conceptual contributions, as well as the original empirical work on heating equipment and electricity products are used to investigate customer preferences and decision-making processes for sustainable energy consumption in the residential sector. Choice experiments show how offering comparative life cycle cost (LCC) information increases the likelihood that heating equipment with lower operating costs will be chosen. This doctoral thesis concludes that marketing efforts should focus on lowering perceived initial costs and on the specific preferences of various customer segments, rather than finding ways to make customers invest more for environmentally sound innovations. This research establishes promising strategies to render eco-innovations attractive and affordable to customers beyond the niche. Better dissemination and consideration of LCC information provides an important base for long-term thinking on the individual, corporate, and policy level.
Language
English
Keywords
Life cycle cost
total cost
consumer preferences
financing renewable energy
product design
choice experiments
discrete choice analysis
preference measurement
electricity market.
HSG Classification
contribution to scientific community
Refereed
No
Publisher
Difo-Druck
Subject(s)
Division(s)
Eprints ID
69535