Southern Economic Association
Southern Economics Association Annual Conference
City and State
November 18-20, 2018
•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.
Chang, Jieun, "Equilibrium sorting and moral hazard in residential energy contracts" (2018). Faculty Articles & Research. 4.