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Retrospective evaluation of appliance price trends

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Author Info

  • Dale, Larry
  • Antinori, Camille
  • McNeil, Michael
  • McMahon, James E.
  • Sydny Fujita, K.
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    Abstract

    Real prices of major appliances (refrigerators, dishwashers, heating and cooling equipment) have been falling since the late 1970s despite increases in appliance efficiency and other quality variables. This paper demonstrates that historic increases in efficiency over time, including those resulting from minimum efficiency standards, incur smaller price increases than were expected by the Department of Energy (DOE) forecasts made in conjunction with standards. This effect can be explained by technological innovation, which lowers the cost of efficiency, and by market changes contributing to lower markups and economies of scale in production of higher efficiency units. We reach four principal conclusions about appliance trends and retail price setting: 1. For the past several decades, the retail price of appliances has been steadily falling while efficiency has been increasing. 2. Past retail price predictions made by the DOE analyses of efficiency standards, assuming constant prices over time, have tended to overestimate retail prices. 3. The average incremental price to increase appliance efficiency has declined over time. DOE technical support documents have typically overestimated this incremental price and retail prices. 4. Changes in retail markups and economies of scale in production of more efficient appliances may have contributed to declines in prices of efficient appliances.

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    File URL: http://www.sciencedirect.com/science/article/B6V2W-4V2J6NG-2/2/57c64236688c944cd76973ec06cc522d
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    Bibliographic Info

    Article provided by Elsevier in its journal Energy Policy.

    Volume (Year): 37 (2009)
    Issue (Month): 2 (February)
    Pages: 597-605

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    Handle: RePEc:eee:enepol:v:37:y:2009:i:2:p:597-605

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    Web page: http://www.elsevier.com/locate/enpol

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    Keywords: Appliance efficiency standards Price forecasts;

    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Stavins, Robert & Jaffe, Adam & Newell, Richard, 1998. "The Induced Innovation Hypothesis and Energy-Saving Technological Change," Discussion Papers dp-98-12-rev, Resources For the Future.
    2. Greening, Lorna A & Sanstad, Alan H & McMahon, James E, 1997. "Effects of Appliance Standards on Product Price and Attributes: An Hedonic Pricing Model," Journal of Regulatory Economics, Springer, vol. 11(2), pages 181-94, March.
    3. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
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    Cited by:
    1. Weiss, Martin & Patel, Martin K. & Junginger, Martin & Blok, Kornelis, 2010. "Analyzing price and efficiency dynamics of large appliances with the experience curve approach," Energy Policy, Elsevier, vol. 38(2), pages 770-783, February.
    2. David Simpson, 2011. "Do Regulators Overestimate the Costs of Regulation?," NCEE Working Paper Series 201107, National Center for Environmental Economics, U.S. Environmental Protection Agency, revised Dec 2011.
    3. Siderius, Hans-Paul, 2014. "Setting MEPS for electronic products," Energy Policy, Elsevier, vol. 70(C), pages 1-13.
    4. Panzone, Luca A., 2013. "Saving money vs investing money: Do energy ratings influence consumer demand for energy efficient goods?," Energy Economics, Elsevier, vol. 38(C), pages 51-63.
    5. Siderius, Hans-Paul, 2013. "The role of experience curves for setting MEPS for appliances," Energy Policy, Elsevier, vol. 59(C), pages 762-772.

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