The choice of heating systems and fuels by households in Finland
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Abstract
The purpose of this study is to explain the choice of heating systems and fuels by households in Finland. For this purpose, we have derived a model based on discrete choice theory and the household production approach of consumer theory. We expand on the framework of discrete choice theory in two ways. ( 1 ) Previous heating choice studies have been aspatial. One purpose of our study was to incorporate the spatial variation on the supply and consumer sides of energy system choice. ( 2 ) Prior studies are also based on the assumption that the decisions made by consumers are not influenced by other consumers decisions. Since this assumption is not appropriate in energy choices, we make a second modification by specifying a diffusion effect which represents interaction between consumers. The model we formulate is a multinomial logit model of heating system choice, whose arguments are consumer characteristics, choice set characteristics, spatial characteristics and a diffusion variable. For the estimation of the model we use a sample of over 2000 owner- occupied, newly built, single-family homes, drawn from the Finnish census of 1980. Preliminary statistical tests of the multinomial logit model indicate that the assumption of IIA (independence of irrelevant alternatives) cannot be maintained . Consequently, we reformulate a nested logit model, assuming a hierarchical structure of decisions . In the higher nest, the choice among the heating systems is made, and conditional on that choice, the fuel choice is made in the lower nest. The results of the estimation suggest, first, that our new formulation of the logit model to include the spatial variables and the diffusion effect is supported by the data. Second, our analytical findings s upport the importance of not only household characteristics ( such as income, age and number of children ), but also the choice set characteristics (such as the market cost and the physical work involved in using a system), spatial characteristics and the diffusion effect. Our policy conclusions focus on improving the technical qualities of wood as a future directions of work.
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Dissertation (Ph.D.)--Boston University
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