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Getting appliance labels right

Written by eveningindia

Star ratings are used in labels on appliances like refrigerators and air-conditioners to tell consumers how energy-efficient they are, with ratings going from 1-5 stars. But labels don’t really tell consumers how they’ll benefit financially from buying appliances with higher ratings. So consumers tend to ignore these ratings and use retail prices to compare and buy electronics.

A study finds that if the yearly cost of running a refrigerator is mentioned on the label, consumers will realize how more efficient fridges are more cost effective, and become more willing to buy the most efficient 5-star ones, a new study by Manisha Jain of the Indira Gandhi Institute of Development Research, Mumbai and others suggests.

By buying a 5-star fridge instead of a less efficient 4-star one, a consumer could save an estimated 6,800- 11,000 over the lifetime of the appliance. If consumers are provided this data, they may often be willing to pay that extra amount for the more energy efficient device, the study finds.

The study is based on a 2015 survey of 302 households in suburban Mumbai. Respondents were asked to choose between refrigerators based on price, star ratings, brand, freezer space and other factors. The annual operating cost, i.e. the charges for the electricity consumed over a year, were revealed to some, and not to others. So some respondents had that additional bit of information to choose between fridges and others didn’t.

In the group that wasn’t shown annual operating costs, only 54% choose 5-star fridges over 4-star ones. But in the group that was shown annual operating cost info, the figure was significantly more at 76%.

The analysis also estimates that people are willing to pay 10,500 more to get a 5-star fridge over a 4-star one when they know the annual operating costs. But when consumers don’t have operating cost information, they don’t realize the savings they can make, and are willing to pay only 1,800 to get the more efficient fridge.

Also read: “Energy Cost Information and Consumer Decisions: Results from a Choice Experiment on Refrigerator Purchases in India

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