"Equilibrium sorting and moral hazard in residential energy contracts" by Jieun Chang
 

Document Type

Paper

Organization

Southern Economic Association

Conference Title

Southern Economics Association Annual Conference

City and State

Washington, D.C.

Conference Date

November 18-20, 2018

Publication Date

11-19-2018

Abstract

Summary

•This paper studies tenant behavior in rental housing when the landlord pays for heating.

•For a fixed cost of heating, households that choose tenant-pay contracts prefer higher thermostat settings than households that choose landlord-pay contracts.

•Eliminating moral hazard by forcing all renters to pay their own bill reduces energy consumption by 25% due to renters turning down the heat (22%) and choosing smaller units (3%).

•Moral hazard in residential energy contracts cost $839 million per year in welfare losses.

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