On 21 June 2019, Madeline Werthschulte, researcher at the University of Muenster, will present research findings from the ENABLE.EU project at the Friday Lunch Meeting of the Climate Economics Chair of the Paris-Dauphine University. The presented study “Cost misperceptions and energy consumption” was done jointly with Andreas Löschel, Professor at the University of Muenster. The aim of the study is to analyze the extent to which energy cost misperceptions can predict households’ energy consumption. The focus is on two sorts of misperceptions: first, present-biased discounting of future energy costs and second, uncertainty in energy prices. By running an artefactual field experiment with a representative sample of 711 participants, the researchers gathered incentivized measures of these two misperceptions and observed participants’ revealed electricity consumption. The main finding is that participants with present bias are predicted to consume on average 9% more electricity than participants with time-consistent discounting. The results further suggest that neither the true marginal electricity price nor the expected marginal electricity price can predict electricity consumption. Taken together, this raises doubt regarding the effectiveness of classical price-based policies in reducing household electricity consumption.
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