Behavioral economics and energy market

Authored by: Özlem Özdemir

Routledge Handbook of Energy Economics

Print publication date:  September  2019
Online publication date:  September  2019

Print ISBN: 9781138208254
eBook ISBN: 9781315459653
Adobe ISBN:


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Economists mainly focus on equipment cost, energy prices, and personal electricity consumption topics when they try to model the energy market. However, behavioral economics research on energy show that consumers fail to purchase energy efficient vehicles, appliances, and lighting, and they do not put energy saving as a priority. There are mainly three cognitive biases that may cause these behaviors: bounded rationality, bounded willpower, and bounded self-interest. This chapter review the empirical studies, mainly experiments that investigate effects of these biases on the household and workplace behavior in the energy market. Through reviewing, it tries to summarize the possible policies (providing real-time energy consumption information or using social norms) to increase energy efficiency and saving.

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