Setting the temperature lower would be the most energy efficient setting, but the question is open whether this would be a significant savings. It may be beneficial to the heater--IIRC the instructions for my Bosch Aquastar 125B say that if the heater is set at the lowest flame setting then it may never have to be descaled.
The downside of outputting a lower temperature of water is that this will reduce the ability to supply multiple simultaneous uses.
But there is the question of microbes in the water and specifically Legionella, the cause of Legionnaires' disease. All over the scientifically based world the recommendation is that water stored in tanks should be kept cold or at a temp of 130 to 140 F, not in between. It is not clear how this applies to hot water supply systems that use a tankless heater.
If all the water that ends up abandoned in the hot water pipes after the hot water taps are turned off has been heated to 140 F, then that would have killed "all" the Legionella in the incoming water. As it sits in the hot water line and gets tepid there is not enough surviving bacteria to grow to a dangerous level. But if the heater never heats the water past say 105 F, then Legionella will survive to grow in the hot water supply lines.