Undergraduate Honors Theses

Thesis Defended

Spring 2011

Document Type

Thesis

Department

Economics

Abstract

The Principal-Agent (PA) problem – the lack of incentives for lessees to invest in energy-efficient technologies – has been documented in the commercial building sector, but empirical research has been limited (Blum and Sathaye 2010). Owner-occupied and lessee-occupied space in commercial buildings in the United States to determine if a PA problem exists. The first part of this study uses a repeated cross-section of commercial buildings from 1992 to 2003, to estimate an ordinary least squares regression of energy consumption on lessee/owner status. Oaxaca Decompositions determine if the difference in energy consumption between owner-occupants and lessees is a result of differences in building characteristics, or finds owner-occupants in the single-tenant subsample of non-mall and non-lessees, which is significant evidence of the Efficiency PA problem. This research finds no significant evidence of the Usage PA problem within the multiple tenant subsample. It is determined that the efficiency of building equipment, reflected by building occupants’ behavior, is a much more accurate predictor of their total energy consumption than is the average characteristics of their building, and differences in occupants’ behavior is likely caused by PA problem.

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