Behavioral and market determinants of energy consumption in Kenya
We quantify behavioral biases and market frictions affecting poor households’ adoption of energy efficient durables in the context of charcoal cookstoves in Nairobi. Over 80% of Nairobi households depend on charcoal, spending up to 25% of the budget on cooking fuels. While a substantial literature studies how behavioral anomalies contribute to the energy efficiency gap in the US, little work exists in a development setting. In low-income environments, biases could be exacerbated by stress associated with poverty; or, because poverty makes large, durable purchases high-stakes, poorer individuals might make decisions more carefully. We study how inattention to future savings, concentration bias, and present bias interact with credit constraints to cause under-adoption in this context. This will be the first paper to quantify the energy efficiency gap, identify the mechanisms driving it, and it will do so in a high-stakes development setting.