Willingness-to-Pay for Energy Conservation and Free-Ridership on Subsidization – Evidence from Germany

Figure 1: Marginal WTP Estimates

marginal WTP in Euro per kWh

Figure 1 shows the distribution of households’ MWTP per kWh change in
the building’s primary energy demand. An interesting insight into the valuation
of energy savings in Germany can be gleaned from the lower panel of Figure 1,
which shows the distributions of MWTP estimates according to whether house-
holds live in the eastern or western part of the country. Eastern households are
seen to reveal a much higher MWTP and a larger variability in their estimates,
determining almost the entire right tail of the distribution in the upper panel.
Table 3 reports summary statistics of MWTP estimates obtained from the error
components logit model. Eastern households exhibit a mean MWTPofe3.28 per
kWh, while the mean western MWTP is considerably less at e1.72.⁹ The much
lower standard deviation indicates that the evaluation of energy savings among
western households is fairly homogenous. Given that the immense discrepancy in

⁹Using a Mann-Whitney test we checked whether the east and the west MWTP stems from
the same population. We reject this hypotheses at a significance level of p < 0.0001.

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