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A Nested Logit Model of Space and Water Heat System Choice

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  • Jeffrey A. Dubin

    (California Institute of Technology)

Abstract

This paper estimates a nested logit model for space heat and water heat choice using data from the 1980 Pacific Northwest Energy Survey (PNW). The estimated structure involves six alternative space heat systems and three alternative water heat fuel types. Operating and capital costs are predicted for each residence using an energy thermal model. To relax the Independence of Irrelevant Alternatives assumption we employ a family of nested logit models. We illustrate the two-step estimation method and use a Lagrange multiplier test for nested logit structure. Finally, we use the estimated models to forecast the market shares of alternative space heat systems under an assumed scenario for the course of relative fuel prices.

Suggested Citation

  • Jeffrey A. Dubin, 1986. "A Nested Logit Model of Space and Water Heat System Choice," Marketing Science, INFORMS, vol. 5(2), pages 112-124.
    • Handle: RePEc:inm:ormksc:v:5:y:1986:i:2:p:112-124
    DOI: 10.1287/mksc.5.2.112
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    Cited by:

    1. Nicholas Rivers and Leslie Shiell, 2016. "Free-Riding on Energy Efficiency Subsidies: the Case of Natural Gas Furnaces in Canada," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    2. Michelsen, Carl Christian & Madlener, Reinhard, 2011. "Homeowners' Preferences for Adopting Residential Heating Systems: A Discrete Choice Analysis for Germany," FCN Working Papers 9/2011, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).
    3. Robert Bartels & Denzil Fiebig & Arthur Soest, 2006. "Consumers and experts: an econometric analysis of the demand for water heaters," Empirical Economics, Springer, vol. 31(2), pages 369-391, June.
    4. Michelsen, Carl Christian & Madlener, Reinhard, 2012. "Homeowners' preferences for adopting innovative residential heating systems: A discrete choice analysis for Germany," Energy Economics, Elsevier, vol. 34(5), pages 1271-1283.
    5. Baltas, George & Doyle, Peter, 2001. "Random utility models in marketing research: a survey," Journal of Business Research, Elsevier, vol. 51(2), pages 115-125, February.
    6. Bartels, R & Fiebig, D.G & McCabe, A, 2004. "The value of using stated preference methods: a case study in modelling water heater choices," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 64(3), pages 487-495.
    7. Hongmin Li & Woonghee Tim Huh, 2011. "Pricing Multiple Products with the Multinomial Logit and Nested Logit Models: Concavity and Implications," Manufacturing & Service Operations Management, INFORMS, vol. 13(4), pages 549-563, October.
    8. Wasi, Nada & Carson, Richard T., 2013. "The influence of rebate programs on the demand for water heaters: The case of New South Wales," Energy Economics, Elsevier, vol. 40(C), pages 645-656.
    9. Karytsas, Spyridon, 2018. "An empirical analysis on awareness and intention adoption of residential ground source heat pump systems in Greece," Energy Policy, Elsevier, vol. 123(C), pages 167-179.
    10. Shijin Yoo & Seh-Woong Chung & Jin Han, 2006. "A Durable Replacement Model for Symbolic versus Utilitarian Consumption: An Integrated Cultural and Socio-economic Perspective," Global Economic Review, Taylor & Francis Journals, vol. 35(2), pages 193-206.
    11. Tanaka, Takuro & Mizutani, Fumitoshi, 2023. "Determinants of the adoption of energy efficient water heaters in the residential sector: Evidence from a survey in Japan," Energy Policy, Elsevier, vol. 180(C).
    12. Krishnamurthi, Lakshman & Raj, S. P. & Sivakumar, K., 1995. "Unique inter-brand effects of price on brand choice," Journal of Business Research, Elsevier, vol. 34(1), pages 47-56, September.
    13. Karytsas, Spyridon & Polyzou, Olympia & Karytsas, Constantine, 2019. "Factors affecting willingness to adopt and willingness to pay for a residential hybrid system that provides heating/cooling and domestic hot water," Renewable Energy, Elsevier, vol. 142(C), pages 591-603.
    14. Goto, Hisanori & Goto, Mika & Sueyoshi, Toshiyuki, 2011. "Consumer choice on ecologically efficient water heaters: Marketing strategy and policy implications in Japan," Energy Economics, Elsevier, vol. 33(2), pages 195-208, March.
    15. Sanjog Misra, 2005. "Generalized Reverse Discrete Choice Models," Quantitative Marketing and Economics (QME), Springer, vol. 3(2), pages 175-200, June.
    16. Karytsas, Spyridon & Theodoropoulou, Helen, 2014. "Public awareness and willingness to adopt ground source heat pumps for domestic heating and cooling," Renewable and Sustainable Energy Reviews, Elsevier, vol. 34(C), pages 49-57.
    17. Kalyanam, Kirthi & Lenk, Peter & Rhee, Eddie, 2017. "Basket Composition and Choice Among Direct Channels: A Latent State Model of Shopping Costs," Journal of Interactive Marketing, Elsevier, vol. 39(C), pages 69-88.

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