The role of risk preferences and loss aversion in farmers’ energy-efficient appliance use behavior

Abstract Improving rural household energy efficiency is an important policy issue for climate change mitigation in China. A better understanding of the factors affecting farmers' energy-efficient appliance use behavior can help policymakers design more effective policies. This paper explores the effect of farmers' risk preferences and loss aversion on their energy-efficient appliance use behavior in rural China. Using unique data from a survey and a paired lottery experiment completed by 235 rural household heads in the Dazu District of China, this study finds that the farmers' risk preferences and loss aversion have significant effects on their energy-efficient appliance use behavior. The more risk-averse farmers are less likely to buy or use energy-efficient appliances. The farmers who are more loss averse are more willing to purchase and more likely to use durable energy-efficient appliances. In addition, the farmers' demographic factors (age, gender, education, and family location), their perceptions of climate change adaptation and their trust attitudes have significant effects on their energy-efficient appliance use behavior. This paper contributes to the emerging literature that relates risk preferences and loss aversion in experiments to farmers’ energy-efficient appliance use behavior.