Appliance labeling and consumer heterogeneity: A discrete choice experiment in India

Appliance labels are a widely used policy instrument to increase the adoption of energy-efficient technologies. Most countries use categorical labels to facilitate comparison of appliances based on energy consumption. Studies have found that consumers respond positively to the labels, but the differentiated response to the categories on labels is not well understood in the literature. This study presents the results of a discrete choice experiment corroborated by an analysis of secondary market data to demonstrate that consumers differentiate between label categories; with a greater value being placed on appliances with higher levels of energy efficiency performance. We examine two appliances - air conditioners and refrigerators and observe that there are some differences in consumer response - likely due to the different usage patterns of the two appliances. Consumer responses were observed in hypothetical choice situations constructed ensuring statistical and design efficiency. In a mixed logit model specification with correlated random parameters, the magnitude and the distribution of consumer preference for the highest category of energy efficiency are estimated. The results are validated by estimating the incremental price of higher category of energy efficiency using market data for comparison. The sources of consumer heterogeneity for the highest category of energy efficiency are identified after controlling for other consumer variables. The findings presented in this paper are useful for improving the effectiveness of existing energy efficiency programs and designing new programs to accelerate adoption of energy efficient technologies.