Heating technology and energy use: a discrete/continuous choice approach to Norwegian household energy demand

The aim of this paper is to describe the structure of the household's energ y demand as a discrete/continuous choice and, on this basis, establish an e conometric model suitable for the data available in the Norwegian Energy Su rveys. The discrete appliance choice is specified as a multinomial logit mo del, with a mixture of appliance attributes (operating costs) and individua l characteristics (income, housing unit characteristics, etc.) as explanato ry variables. In the next step the continuous choice of energy use is model led conditional on the appliance choice. The energy prices turn out to be s ignificant both when estimating the appliance choice and the conditional en ergy demand. The estimated price elasticity for energy exceeds minus unity. The paper discusses how this relatively strong price response should be in terpreted in the context of other econometric analysis with no explicit app liance dependence. Finally, the significance of the many household characte ristics at both stages of the model signals a high degree of heterogeneity within the households, which justifies the use of detailed micro-data in th e modelling of the energy demand. (C) 2000 Elsevier Science B.V. All rights reserved. JEL classifications: C25; D12.