Why the light bulb is no longer a textbook example for price elasticity: Results from choice experiments and demand modeling research

Panel: 7. Monitoring and evaluation

This is a peer-reviewed paper.

Authors:
Andrew Stryker, DNV KEMA Energy & Sustainability, USA
Kathleen Gaffney, DNV KEMA Energy & Sustainability, USA

Abstract

An internet search for textbook examples of “price elasticity” invariably delivers the following demand equation: “the quantity of light bulbs demanded is an inverse function of the price of light bulbs” (i.e., as the price of light bulbs rises, the quantity of light bulbs demanded falls). However, is it really that simple? Recent research from California suggests that the demand for light bulbs has become increasingly more complex, as new lighting technologies serving multiple applications with varying efficiency levels have become more readily available due to changes in policies, standards, supply side business models, utility programs and ultimately consumer demand. This paper will present the results of consumer intercept surveys completed with nearly 1,000 shoppers in over 200 lighting retail stores. Data from these surveys formed the inputs to a series of choice experiments and demand models. Preliminary results suggest that while changes in light bulb purchases remain largely influenced by price, there are a number of other important factors that explain customer choice – such as, whether the light bulb was a planned or “impulse” purchase, how many light bulbs are needed at the time of purchase, what type of light bulb was used prior to the purchase of a replacement, what task or application the light bulbs is being used for, and how often the light bulbs will used. Understanding and quantifying the influence of these other factors can help inform lighting policy and program design to more effectively address non-price barriers.