Investing in residential energy-efficient products like electrical appliances and small electronic products often requires consumers to pay more upfront for more efficient products in comparison to less efficient appliances, though savings in overall cost savings are achieved across the lifespan of the product due to significantly lower running costs. As such, when selecting a new appliance, the consumer must determine the overall costs of an appliance over time in order to determine which is most cost effective. However, when making residential appliance choices, consumers often do not choose the option most beneficial for them, instead choosing the option which is least expensive upfront. This ineffective decision making is thought to be due to temporal discounting, or the tendency to choose the least expensive option now, over the less expensive option over time. This bias towards certain, immediate rewards in contrast to greater, uncertain rewards appears a key factor impacting the adoption of energy efficient residential technologies. To increase the uptake of energy efficient appliances, analysis of these discount rates and the factors which impact them is needed. This use case seeks to explore, through the use of a series of choice experiments, the impact of energy related financial literacy, demographic factors and environmental literacy on discount rate and willingness to pay for efficient household appliances. The following methodology will be used.

This use case consists of a quasi-experiment, exploring the impact of financial and environmental literacy on discount rates and willingness to pay for efficient household appliances. Each participant will be presented with several hypothetical energy appliance choices (i.e. ovens, fridge, washing machine etc.), and will be asked to identify the offer that he/she would choose. Choice experiments were selected as they offer the advantage of being able to include service attributes that are not available in real world markets, or have not varied sufficiently in markets to allow estimation. Surveys are expected to be conducted in several countries using a large number of participants. Discrete choice models would be used to assess the effectiveness of different types of attributes in influencing consumers’ preferences. Attributes to be explored include extended warranties, low cost loans, extended loan terms, amongst others.