4.3. Estimation Results of the Model with Covariates
, respectively, be the covariate vector for respondent
and the corresponding parameter vector to be estimated. To investigate how covariates influence the probability of stating ‘yes’ to an offered bid, we estimate the model with covariates, where
in Equation (1) is simply replaced with
. The socio-economic variables used for the covariates and their sample statistics are described in Table 3
. For example, 50% of the participants were male, and the average household income was KRW 4.33 million (USD 3910) per household per month.
contains the results from estimating the OOHB DC spike model including some socio-economic variables. In this model, we can compute the spike as
is the vector of the mean values given in Table 3
is the vector of the coefficient estimates presented in Table 4
. The spike is calculated as 0.5143, which is same to the value in Table 2
(0.5134). The mean WTP as a premium for using an induction cooktop rather than a gas stove is calculated to be KRW 203 (USD 0.18) per cubic meter of residential gas. This value is also close to that in Table 2
(KRW 207). Adding covariates to the model does not significantly change the estimates for the spike and mean WTP.
The estimates of the coefficients for gender, family, education, and income variables all have statistical meaningfulness at the 5% level and are negative, negative, positive, and positive. Female respondents have a higher probability of answering ‘yes’ to a bid than male respondents. Respondents whose household size is smaller have a higher tendency to report ‘yes’ to an offered bid than others. More educated respondents are more likely to say ‘yes’ to a given bid than others. Household income has a positive relation to the probability of stating ‘yes’ to a presented bid.
4.4. Discussion of the Results
No assessment of the convenience and safety benefits of using an induction cooktop rather than a gas stove has been reported in the literature. Thus, it seems that the issue is not an important research topic in most countries. In Korea, however, information about the convenience and safety benefits of using an induction cooktop rather than a gas stove is needed. As explained above, the use of induction cooktops is expanding quickly in Korea since many people have become interested in their convenience and safety features. Consequently, uncovering the convenience and safety benefits to consumers of using an induction cooktop instead of a gas stove is meaningful for Korea.
Before we expand the sample results to the whole population, it is necessary to examine whether the sample represents the national population well. In this regard, from Statistics Korea we founded three socio-economic variables through which we can compare the characteristics for the sample with those for the population. They are the household’s monthly income, the size of the household, and the ratio of female respondents. At the time of survey, the values were KRW 4.37 million, 3.17 persons, and 49.9%, respectively. Our sample averages are KRW 4.33 million, 3.31 persons, and 50.0%. The former values are not significantly different from the latter values. In addition, with the help of the trained interviewers who were affiliated with a professional survey firm, almost 100 percent of the interviewed households answered to all questions in the CV survey.
From our results we estimate that the mean additional WTP a premium for using an induction cooktop rather than a gas stove is KRW 207 (USD 0.19) per cubic meter of residential gas. Given that in 2015 the average price of residential gas for cooking was KRW 775.13 (USD 0.70) per cubic meter, the convenience and safety benefits that ensue from using an induction cooktop instead of a gas stove amount to 26.7% of the average price of residential gas for cooking. This suggests that Korean residents would be willing to pay a significant premium to use an induction cooktop instead of a gas stove. Changing from gas stoves to induction cooktops would thus be preferred for Korean households.
The average prices of residential gas and residential electricity in 2015 were KRW 73.12 and 143.83 per calorie, respectively. The gap was KRW 70.70 KRW per calorie. The estimated mean premium for induction cooktops over gas stoves can be converted to KRW 19.53 per calorie. Therefore, the households with lower WTP for using an induction cooktop instead of a gas stove than the gap are not likely to use the induction cooktops. On the other hand, the households with higher WTP for using an induction cooktop instead of a gas stove than the gap tend to use the induction cooktops. These results can be utilized in predicting the residential electricity demand for the induction cooktops with respect to the price of residential electricity relative to that of residential gas price, since an induction cooktop is a substitute for a gas stove.
The Korean government is preparing a long-term national plan for electricity, the 8th Basic Plan for Long-term Electricity Supply and Demand (2017–2031). The plan includes the long-term outlook for electricity supply and demand, plans for generation facilities, transmission facilities, and transformation facilities, and plans for electricity demand management. The initial task when drawing up the plan is to forecast the electricity demand. In doing this, a number of issues, such as predictions of the gross domestic product, the price of electricity, temperature, and how many electric vehicles will be on the roads, are considered. An important issue to be considered when forecasting the electricity demand is how the supply of induction cooktops will be expanded and how far the expansion will affect residential electricity use. The results from our study can be used in looking into this issue. If the gap between the price for residential electricity and the price for residential gas is less than the WTP value, households will increase their demand for residential electricity because they will replace their gas stoves with induction cooktops. These points should be reflected in forecasting the demand for residential electricity.