Can precise numbers boost energy efficiency?

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Abstract

The United States has long recognized the potential of improved energy efficiency to profitably reduce energy consumption in manufacturing. The Department of Energy (DOE) has also recognized the potential and initiated several programs to enhance energy efficiency in manufacturing. Despite the attention, studies point out that many energy-efficiency opportunities remain unexploited. Increasingly, scholars have emphasized that behavioral factors could facilitate the uptake of energy-efficiency practices. Accordingly, we adopt a behavioral perspective and investigate whether precision (a hitherto unexplored behavioral factor) affects the adoption of energy-efficiency practices. Specifically, we examine whether the implementation of energy-efficiency practices depends on whether the costs and savings associated with such practices are presented as precise (e.g., $20,431) or round (e.g., $20,400) numbers. First, we explore the impact of precision with econometric analysis using data on energy-efficiency recommendations made by the DOE to small- and medium-sized manufacturing firms. Our econometric analysis indicates that energy-efficiency recommendations with precise cost and precise saving exhibit higher adoption rates as compared to other recommendations. Next, we use individual interactions with managers and laboratory experiments with managers and students to replicate and isolate the precision effects. Then, we elicit the mechanism by which precision affects the adoption of energy-efficiency initiatives. We find that credibility serves as a key mechanism that drives the precision effect. Our findings suggest that credibility-enhancing cues such as precision can be leveraged to increase the uptake of energy efficiency and possibly other process improvement practices.

Original languageEnglish (US)
Pages (from-to)3264-3287
Number of pages24
JournalProduction and Operations Management
Volume31
Issue number8
DOIs
StatePublished - Aug 2022

All Science Journal Classification (ASJC) codes

  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering
  • Management of Technology and Innovation

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