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Price Premium for High-Efficiency Refrigerators and Calculation of Price-Elasticities for Close-Substitutes: Combining Hedonic Pricing and Demand Systems

  • Ibon Galarraga
  • David Heres Del Valle
  • Mikel González-Eguino

This article uses the hedonic pricing method to estimate the price premium paid for the highest energy-efficiency label (A+) in the refrigerators market of the Basque Autonomous Community (Spain). The estimated figure is 8.9% of the final price or about 60 euro, which represents one third of the energy savings that a consumer gets during the lifetime of a refrigerator with the highest energy-efficiency label. This figure is then combined with the linear version of the Almost Ideal Demand System (LA/AIDS) to obtain own and cross-price elasticities of demand. The information presented here is useful for policy design and analysis. The results indicate that the demand for refrigerators with the highest energy-efficiency label is highly sensitive to price variations.

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Paper provided by BC3 in its series Working Papers with number 2011-07.

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Date of creation: Aug 2011
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Publication status: Published
Handle: RePEc:bcc:wpaper:2011-07
Contact details of provider: Web page: http://www.bc3research.org/

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  1. Mills, Bradford F. & Schleich, Joachim, 2009. "What's driving energy efficient appliance label awareness and purchase propensity?," Working Papers "Sustainability and Innovation" S1/2009, Fraunhofer Institute for Systems and Innovation Research (ISI).
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  7. Alex Coad & Peter de Haan & Julia Sophie Woersdorfer, 2008. "Consumer support for environmental policies: An application to purchases of green cars," Jena Economic Research Papers 2008-035, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
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  11. Ivanova Nadezhda, 2005. "Estimation of own- and cross-price elasticities of disaggregated imported and domestic goods in Russia," EERC Working Paper Series 05-13e, EERC Research Network, Russia and CIS.
  12. Ibon Galarraga & Anil Markandya, 2003. "The analysis of welfare effects of an environmental product tax: an application to the taxation of car tyres in Hungary," Fiscal Studies, Institute for Fiscal Studies, vol. 24(1), pages 97-114, March.
  13. Oczkowski, Edward, 2001. "Hedonic Wine Price Functions and Measurement Error," The Economic Record, The Economic Society of Australia, vol. 77(239), pages 374-82, December.
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  16. Markandya, Anil & Ortiz, Ramon Arigoni & Mudgal, Shailendra & Tinetti, Benoit, 2009. "Analysis of tax incentives for energy-efficient durables in the EU," Energy Policy, Elsevier, vol. 37(12), pages 5662-5674, December.
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