The Role of Price Elasticities and Economic Incentives in Electricity Consumption.

Electricity consumption in German households is continuously increasing. At the same time, studies have shown a large electricity savings potential in private households. Are more efficient household appliances too expensive or is electricity too cheap, thus providing no incentive to save? This article presents an experiment seeking to answer this question. The experiment tested the price sensitivity of consumers with respect to the price of electricity as well as the prices of energy efficient appliances. In addition, a survey integrated in the experiment gathered socio-economic data on the test persons, thereby allowing us to analyze determinants of differences in the observed price sensitivity of the test persons. Findings suggest that an increase in the price of electricity by itself would have little success in motivating buyers to realise their savings potentials. On the other hand, results indicate that specific political instruments like subsidies and better information can be promising complementary political interventions, when it comes to reducing private electricity consumption. In sum, the experiment allowed us to deduct insights on the impact and functioning of specific political instruments, i.e. gain a better understanding on strategies for the promotion of sustainable consumption. [ABSTRACT FROM AUTHOR]