"Chapter 1: Moral Hazard and Equilibrium Sorting in Residential Energy Markets: This chapter studies tenant behavior in rental housing when the landlord pays for heating. I develop a model in which renters have heterogeneous preferences for home size and indoor temperature. When energy is costly, renters choose smaller apartments and turn down the heat---or sort into apartments with landlord-pay energy bills. I estimate the model using exogenous variation in energy prices and use a machine-learning algorithm to explore preference heterogeneity. Surprisingly, I find that renters who prefer hotter temperatures do not systematically choose landlord-pay units, though I am unable to rule out sorting on preferences for unobserved home attributes. 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 the United States $839 million per year in welfare losses including $238 million from carbon emissions. Chapter 2: The Remarkably Inelastic Demand for Home Heating Services: A Choice Experiment: I conduct a stated-choice experiment that presents research subjects with hypothetical costs to adjust their thermostats. I estimate responses to the cost ofheating and analyze the causes for heterogeneity in household demand for energy services, using the experimental results as a complete-information baseline. I find that even at the highest price level, half of the participants exhibit zero response to price. Further, I find that participants' experimental behavior with complete information can explain the full range of observed real-world temperature settings, suggesting a limited role for informational barriers or price salience issues in energy-service demand heterogeneity. Individuals with higher temperature preferences are more price responsive, suggesting that increasing blockpricing for energy may reduce energy consumption while minimizing the regressivity of the energy pricing program. Chapter 3: Negawatts v. Megawatts: Demand Response in Wholesale Electricity Markets (with Katherine Wagner): We study the Federal Energy Regulatory Commission's (FERC) wholesale demand-response program. In this program, participants sell a reduction in electricity use from a baseline on the wholesale electricity market as if it was electricity generation. We show that demand-response participants have different incentives to consume electricity based on whether they participate directly, through a third-party aggregator, or through a utility aggregator. We argue that the current wholesale demand-response program is inefficient and should be replaced by retail demand-response programs run by utilities."--Pages ii-iii.
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