“Essentially, we’re leveraging on people’s tendency to overweight small probabilities,” Bitar said. The probability of winning, like the lottery, decreases as the prize increases – but there’s a reason why people play the lottery, too. Depending on how often they allow Con Edison to increase their temperature set points to save energy during peak usage times, they’re entered into a raffle with several tiers, starting at a chance to win $5 all the way to several hundred dollars. In the experiment, 200 households can opt in to a demand response program for remotely controllable wall-mounted air conditioning units in the New York City area. Their approach is rooted in the behavioral economics principles of risk-seeking agency in decision-making. Supported by a National Science Foundation grant, Bitar has led a summerlong project testing a demand response program that plays to the behavior of consumers when given the chance, however small, to win a large sum of money. These programs usually come in the form of marginal cost-based monetary incentives, but participation is usually low because there is not enough money involved. this summer has shown that consumers might be willing to back off of demand if there’s a game of chance involved.Īmong Bitar’s research interests is designing what’s called demand response programs – initiatives by power companies aimed at decreasing demand, as opposed to increasing supply in the energy consumption equation. Led by Eilyan Bitar, assistant professor of electrical and computer engineering, an experiment in partnership with Consolidated Edison Inc. power grid operates closer to its capacity, spikes in demand can lead to tremendous cost increases.Ĭornell researchers are tackling this issue with a behavioral economics-based twist. Meanwhile, the expansion of electricity transmission and generation capacity, even with increases in renewable energy sources, hasn’t kept pace with demand. It’s what economists call inelastic demand – the resource is widely sought and always available, and there’s little motivation to conserve. If we’re hot, we crank up the AC, without a second thought on the power grid strain.
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