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Analysis of Consumer Preferences for Residential Lighting through Consumer Panel Data
Jihoon MinResearch ScholarInternational Institute for Applied Systems Analysis (IIASA)
Inês AzevedoAssociate ProfessorCarnegie Mellon University
Presentation provided by Brock Glasgo due to scheduling conflicts in the USAEE agenda
October 27, 2015
33rd USAEE/IAEE North American Conference
Oct 25-28 Pittsburgh, Pennsylvania
In the U.S. there are still large opportunities to improve lighting efficiency
2
U.S. Lighting Electricity Consumption by Sector and Lamp Type in 2010 (Navigant, 2012)
The FTC mandated a new “Lighting Facts” label starting from Jan 2012.
3 Source: FTC, http://www.ftc.gov/opa/2010/06/lightbulbs.shtm
The federal government sets light bulb efficiency standards.
4
Rated Lumen Ranges
Typical Current Lamp Wattage
Maximum Rate Wattage
Minimum Rated Lifetime
Effective Date
1490-2600 100 72 1,000 hrs 1/1/2012
1050-1489 75 53 1,000 hrs 1/1/2013
750-1049 60 43 1,000 hrs 1/1/2014
310-749 40 29 1,000 hrs 1/1/2014
The Energy Independence and Security Act (EISA) was signed into law in 2007 and went into effect in 2012.
Set wattage and lifetime requirements for general service lamps, based on lumen output
Big promotion by retailers
5 Source: Wal-Mart news archive, http://news.walmart.com/news-archive/
Questions
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1. How do lighting- and consumer-specific attributes on labels affect lighting choices?
2. Which factors can affect the consumer choices or how are they related?
How does disclosing annual operating cost impact the decisions made by consumers? How do consumers value operating cost savings? How can this information guide policy and promotion efforts?
Past research
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Our study based on a choice-based conjoint experiment Min et al., (2014). "Labeling
energy cost on light bulbs lowers implicit discount rates." Ecological Economics 97 (0): 42-50.
Source: The Center for Behavioral and Decision Research, http://www.cbdr.cmu.edu/datatruck/
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Providing the operating cost information can foster efficient lighting technology due to: Preference shifts toward longer lifetime and lower energy use Large drop in implicit discount rate for light bulb choices.
100% discount rate still higher than other energy technologies The FTC label that includes operation costs can be a good
improvement.
Past findings
Implicit discount rates
Income level
Low (below $30k/yr)
Middle ($30k-75k/yr)
High (over $75k/yr)
Overall
Operating cost not shown 764% (315%) 491% (49.2%) 203% (73%) 560% (70%)
Operating cost shown 182% (38%) 57% (19%) 36% (35%) 100% (22%)Standard errors in parentheses
Goal of this study
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Impact of interventions1. How are relevant policy changes related to changes in
choice patterns?
2. Can a retailer significantly affect adoption of an efficient technology?
Cross-validation1. Which factors affect choices and how do these compare
with the findings from the previous study?
2. Will the new implicit discount rates be similar to the values estimated earlier?
Data (1/2)
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Consumer Panel Data (collected by Nielsen) Collected from 132,000 participant households through
barcode scanners, Nationally and regionally representative dataset (U.S.)
between 2004 and 2012 Available information
Product: bar code number (UPC), price, category, description, brand, etc.
Household: income, race, education, size, residence type, location, weight, etc.
Shopping trip: retailer type, total dollar spent
Records of general service light bulbs are used for this analysis.
Data (2/2)
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Retailer Scanner Data (also from Nielsen) Weekly POS (point-of-sale) sales data at each store level Available only for groceries, drug stores, and discount
stores (65 retailer types)
Incandescent bulb sales decreasing, CFL sales not increasing much, prices not changing much
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Light bulb sales are concentrated to a few retailers.
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Total light bulb package sales by retailer chain
Total 639 retailer chainsTop 5 takes 43% of total sales.
Key observations
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Overall light bulb sales are decreasing. Before 2008: CFL replacing INC After 2008: Longer life of CFLs (low turnover rate)
CFL sales peaked in 2007 and decrease afterward. INC sales peak observed in 2011
Potentially linked to policy changes or promotions Sales are concentrated to several key retailers.
A strong promotion effort can be effective.
Model specification
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Similar to the stated preference models Basic choice model
Utility is a function of preference coefficients (βk)
…and explanatory variables (xjk): bulb attributes, year, region, brand, demographics, retailer, and channel type
Model for implicit discount rate estimation
Term in parentheses represents equivalent annual cost β2 is the implicit discount rate
Result: Basic Multinomial Logit
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Generally decreasing preference over time for CFL types
Policy and marketing interventions in 2007 are related to a significant increase in CFL preferences Not observed so for year 2012
Preference for bulb energy consumption (W) is not much related to or affected by these interventions
Unit price -0.186 (0.00200)***CFL 0.464 (0.0282)***CFL & year2012 0.0576 (0.04340)CFL & after2007 0.369 (0.0346)***CFL & year -0.103 (0.00693)***watt_nielsen -0.00536 (0.000409)***year2012 & watt_nielsen 0.000241 (0.00069)after2007 & watt_nielsen 0.00127 (0.000509)*watt_year 0.000078 (0.00011)retailerA_CFL -0.611 (0.0327)***retailerA_CFL & year2012 0.387 (0.0626)***retailerA_CFL & after2007 0.379 (0.0398)***retailerA_watt 0.00152 (0.000405)***year2012 & retailerA_watt 0.00213 (0.000988)*after2007 & retailerA_watt 0.000436 (0.00054)lumen_est 0.156 (0.00445)***lumen_sq -0.00692 (0.000173)***size1_amount 0.0134 (0.00105)***Observations 23123522Log-lik -3.71E+09
Results: Willingness-to-pay
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Estimated WTPs for type, wattage, and brightness changes
2004 2005 2006 2007 2008 2009 2010 2011 2012 SP
-$0.1
$0.0
$0.1
$0.2
$0.3
$0.410% brightness increase
2004 2005 2006 2007 2008 2009 2010 2011 2012 SP
-$4
-$2
$0
$2
$4CFL over Incandescent
Results: Willingness-to-pay (continued)
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Smaller magnitudes of WTPs in revealed preference case than in stated preference Potentially linked to
Confounding between unobserved attributes Underestimated price coefficient in SP model
2004 2005 2006 2007 2008 2009 2010 2011 2012 SP
-$0.8
-$0.6
-$0.4
-$0.2
$0.0
$0.2
$0.410W increase
Results: Implicit discount rate
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Estimated for two periods before and after 2012, when the FTC labeling was mandated and the EISA came into effect.
The ranges of discount rate values from the two different dataset are comparable. Both stated preference and revealed preference models
show discount rates higher than 100%.
Revealed Preference Stated Preference
Before 2012 After 2012 Overall Operating cost
shownOperating cost
not shownImplicit discount rate
371% (0.79%) 270% (1.72%) 343% (0.68%) 100% (22%) 560% (70%)
Standard errors in parentheses
Implications and conclusions
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The new ‘lighting facts’ labeling on light bulb packages can help facilitate adoption of efficient light bulbs.
However, other types of barriers persist, which is reflected in the high implicit discount rates. The EISA of 2007 is expected to lower these further.
Efforts by major retailers can have a significant impact on adoption of energy efficient lighting. Can we mandate or incentivize large retailers to increase
sales of efficient products?
