Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
Many households pay a marginal price for electricity that exceeds the marginal social cost of supplying that electricity. We show evidence that such pricing schemes can create an incentive to overinvest in energy efficiency. Using hourly smart-meter data for households facing time-invariant increasing block prices, we estimate how air conditioner upgrades affect electricity use. We find that the average participating household reduces consumption by 5%, which provides private savings in the form of lower electricity bills and social cost savings by decreasing generation and pollution costs. The private savings exceed the social savings by an average of 140%, so the average household is faced with an incentive to overinvest in energy efficiency. This incentive to overinvest in energy efficiency would be cut in half if consumers faced any one of three alternative pricing plans with lower marginal price but the same average price.