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Energy conservation, expectations and uncertainty

  • Wirl, Franz

This paper investigates consumers' decisions about a (single and lumpy) conservation project accounting for uncertainty and expectations (rational versus myopic). Rational expectations take into account that the profitability of individual conservation measures will affect fuel prices (here set by cartelized supply). Ignorance of this interdependence between conservation and price leads to premature investments. The interplay between demand and supply creates an incentive for a consumer cartel to initiate conservation strategically, which advances conservation compared with rational consumers but not always ahead of individually myopic decisions.

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Article provided by Elsevier in its journal Energy Economics.

Volume (Year): 30 (2008)
Issue (Month): 4 (July)
Pages: 1957-1972

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Handle: RePEc:eee:eneeco:v:30:y:2008:i:4:p:1957-1972
Contact details of provider: Web page: http://www.elsevier.com/locate/eneco

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  1. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, volume 1, number 5474, March.
  2. Genc, Talat S. & Sen, Suvrajeet, 2008. "An analysis of capacity and price trajectories for the Ontario electricity market using dynamic Nash equilibrium under uncertainty," Energy Economics, Elsevier, vol. 30(1), pages 173-191, January.
  3. Smulders, Sjak & de Nooij, Michiel, 2003. "The impact of energy conservation on technology and economic growth," Resource and Energy Economics, Elsevier, vol. 25(1), pages 59-79, February.
  4. Tahvonen, Olli, 1996. "Trade with Polluting Nonrenewable Resources," Journal of Environmental Economics and Management, Elsevier, vol. 30(1), pages 1-17, January.
  5. repec:ner:tilbur:urn:nbn:nl:ui:12-123121 is not listed on IDEAS
  6. Lee, Junsoo & List, John A. & Strazicich, Mark C., 2006. "Non-renewable resource prices: Deterministic or stochastic trends?," Journal of Environmental Economics and Management, Elsevier, vol. 51(3), pages 354-370, May.
  7. Wirl, Franz, 1991. "Energy demand and consumer price expectations : An empirical investigation of the consequences from the recent oil price collapse," Resources and Energy, Elsevier, vol. 13(3), pages 241-262, September.
  8. Wirl, F., 1986. "Fuel conservation under rational expectations of the energy price evolution," Resources and Energy, Elsevier, vol. 8(2), pages 185-197, June.
  9. repec:cup:cbooks:9780521894753 is not listed on IDEAS
  10. Wirl Franz, 1994. "Pigouvian Taxation of Energy for Flow and Stock Externalities and Strategic, Noncompetitive Energy Pricing," Journal of Environmental Economics and Management, Elsevier, vol. 26(1), pages 1-18, January.
  11. repec:cup:cbooks:9780521637329 is not listed on IDEAS
  12. Dermot Gately, 2001. "How Plausible is the Consensus Projection of Oil Below $25 and Persian Gulf Oil Capacity and Output Doubling by 2020?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 1-28.
  13. Dermot Gately, 2004. "OPEC's Incentives for Faster Output Growth," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 75-96.
  14. Jerry A. Hausman, 1979. "Individual Discount Rates and the Purchase and Utilization of Energy-Using Durables," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 33-54, Spring.
  15. Bjornstad, David J. & McKee, Michael, 2006. "Making enduring choices: Uncertainty and public policy," Energy Economics, Elsevier, vol. 28(5-6), pages 667-676, November.
  16. Cohen, Daniel & Michel, Philippe, 1988. "How Should Control Theory Be Used to Calculate a Time-Consistent Government Policy?," Review of Economic Studies, Wiley Blackwell, vol. 55(2), pages 263-74, April.
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