This suite of experiments on appliance choice utilizes behavioral and neuroeconomic methods to test for heterogeneity in decision-making processes among consumers. We examine whether behavioral nudges such as the eco-labeling of appliance alternatives shift consumers' decision-making modalities. An implicit assumption in much policy design is that nudges do not alter the decision-making methodology a consumer employs. If such endogeneity exists, behavioral economic policy design and analysis will need to consider the impact of policy on the distribution of decision making processes and the normative implications of subsequent choices. Our experiments are designed to characterize: (1) classes of appliance consumers, (2) attributes of consumers that belong to these different classes, (3) patterns of neural activation in consumers of different classes, (4) decision-making modalities that consumers apply in making appliance choices and (5) switches in decision-making modalities when eco-labels are shown.
Methods and approach
Our first phase is a stated choice experiment in which we classify consumers based on sensitivity to both non-energy attributes (e.g., price) and energy attributes (e.g., Energy Star presence) and characterize these classes based on personal characteristics. This yields predictive mappings between consumer characteristics and (1) consumer classes and (2) appliance choice that will be used in subsequent phases. The second phase adds an incentive-compatible revealed choice experiment. Subjects in this phase will be consumers in the market for appliances. Data from the second phase will allow us to examine the performance of our phase I mappings in explaining out-of-sample choices. Based on our segmentation of consumers in phases I and II, we will recruit subjects for phase III. This last phase mirrors phase II in its setup, except that the revealed choice experiment will be carried out while subjects are scanned using functional magnetic resonance imaging (fMRI).
Contributions to Energy Efficiency
This research will characterize consumer classes and heuristics applied to appliance choice; in particular, it will examine the impact of eco-labeling on decision processing and the relationship between appliance purchasing behavior and financial temporal discounting. Observations of shifts in decision processing would imply a need to reassess policies for behavioral nudges and the provision of information; given such evidence, shifts in decision making processes and outcomes should be included in the design and analysis of policies to encourage energy efficient choices. Moreover, if differences are found between the neural structures recruited for financial decision-making and those for appliance decision-making, this work would provide insight into the unique cognitive or affective processes engaged when consumers are making appliance purchase decisions.