CERE Working Papers, CERE - the Center for Environmental and Resource Economics
Aemiro Melkamu Daniel
Accounting for Elimination-by-Aspects Strategies and Demand Management in Electricity Contract Choice
(), Lars Persson
() and Erlend Dancke Sandorf
Abstract: We report on a discrete choice experiment aimed at
eliciting Swedish households' willingness-to-accept a compensation for
restrictions on household electricity and heating use during peak hours.
When analyzing data from discrete choice experiments, we typically assume
that people make rational utility maximizing decisions, i.e., that they
consider all of the attribute information and compare all alternatives.
However, mounting evidence shows that people use a wide range of
simplifying strategies that are inconsistent with utility maximization. We
use a flexible model capturing a two-stage decision process. In the fi rst
stage, respondents are allowed to eliminate from their choice set
alternatives that contain an unacceptable level, i.e., restrictions on the
use of heating and electricity. In the second stage, respondents choose in
a compensatory manner between the remaining alternatives. Our results show
that about half of our respondents choose according to an
elimination-by-aspects strategy, and that, on average, they are unwilling
to accept any restrictions on heating in the evening or electricity use,
irrespective of time-of-day. Furthermore, we nd that considering
elimination-by-aspects behavior leads to a downward shift in elicited
willingness-to-accept. We discuss implications for policy.
Keywords: Choice experiment; Electricity contract; Willingness-to-accept; Household electricity; Elimination-by-aspects; Two-stage decision; (follow links to similar papers)
JEL-Codes: C25; Q41; Q51; R21; (follow links to similar papers)
23 pages, November 7, 2017
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