Abstract
This paper investigates the relation between estimation techniques and the estimates of consumers’ discount rates. In an earlier paper, the author estimated the average value of discount rates using direct elicitation, which was found to be 50.8%. In this paper, consumers’ discount rates adopted in purchasing room air conditioners are estimated using revealed-preference data. Estimates using hedonic pricing and qualitative choice models indicate discount rates of 13.6% and 10.7%, respectively. The results reveal that the rate estimated using direct elicitation is four- or five-fold the rate estimated using hedonic pricing method or qualitative choice analysis. A possible reason for this is that consumers make cognitive errors and desire unrealistically high returns from the use of energy-efficient models. This paper also examines how consumers’ attentiveness to energy efficiency affects their discount rates, finding that inattentiveness may cause the adoption of higher discount rates.
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The datasets generated during the current study are available from the corresponding author on reasonable request.
Notes
The monetary valuation of environmental goods and services is one of the research areas to which revealed-preference approach is applied. The hedonic pricing method has been utilized to estimate the implicit prices of nonmarket goods such as air pollution. Estimating the economic value of recreation resources uses travel costs as implicit prices.
Stated-preference approach used in the field of estimating the monetary value of environmental goods and services includes the contingent valuation method and conjoint analysis. Contingent valuation is a technique that draws data on preferences for environmental goods or services from people’s responses to hypothetical questions. Conjoint analysis is a method that elicits preferences for different attributes of an individual product or service using survey question.
See Kakaku.com’s website (http://kakaku.com/).
The datasets generated during and/or analyzed during the current study are available from the corresponding author on reasonable request.
The additional cost of purchasing a high-efficiency model of a room air conditioner unit (i.e., ¥25,000) is calculated as the difference between the average price of high-efficiency models and that of standard-efficiency models using retail price data provided by Kakaku.com in November 2009.
Allcott and Greenstone (2012) pointed out that the unobserved attributes of energy-efficient products complicate the estimation of models for consumer choice between energy-consuming durable goods.
For a discussion of functional form choice in hedonic price functions, see Halstead et al. (1997).
This means that the data for the year in which the models were released are normalized at 2005.
The correlation coefficients between saving and income and between saving and education are 0.041 and 0.033, respectively. These suggest that consumers with higher income or higher education are not necessarily more attentive to energy efficiency.
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This research was funded by support from Soka City and the Institute of Human and Environmental Symbiosis Research, Dokkyo University.
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Hamamoto, M. Estimating consumers’ discount rates in energy-saving investment decisions: a comparison of revealed and stated approaches. SN Bus Econ 3, 120 (2023). https://doi.org/10.1007/s43546-023-00504-6
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DOI: https://doi.org/10.1007/s43546-023-00504-6