Household responses to winter heating costs: Implications for energy pricing policies and demand-side alternatives

I conduct a survey that presents research subjects with hypothetical costs to adjust their thermostats. I estimate responses to the cost of heating and analyze the causes for heterogeneity in household demand for energy services using the survey results as a complete-information baseline. I find that even at the highest price level ($8 per 5 degrees F or 2.8 degrees C), half of the participants exhibit zero response to price. On average, a 100 percent increase in the marginal cost of heating the home induces a 0.31 to 0.97 degree Fahrenheit (0.17 to 0.51 degrees C) reduction in the winter heating level, corresponding to a -0.005 to -0.014 elasticity. Further, I find that participants' survey behavior with complete information can explain observed real-world temperature settings, suggesting a limited role for informational barriers or salience issues in energy-service demand heterogeneity. Inelastic demand suggests that energy efficiency policies may have high returns and that centralized demand-response policies may be required to address winter energy emergencies.

Automated summary

I conducted a survey that examined how respondents would react to different costs of adjusting their thermostats. By analyzing the survey results, I found that even at the highest price level, half of the participants did not change their behavior in response to the cost. On average, a 100 percent increase in heating costs led to a small reduction in winter heating level. The survey behavior of participants with complete information can explain real-world temperature settings, suggesting limited role of informational barriers in energy-service demand heterogeneity.