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Household Discount Rates Revisited

Raymond S. Hartman and Michael J. Doane

Year: 1986
Volume: Volume 7
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol7-No1-9
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Abstract:
Energy policy analysts (Hausman [1979], Hartman [1984], Houston [1983], Hutton [1980], and Olsen [1984]) increasingly rely on some notion of life-cycle costing for predicting how consumers will choose among alternative energy-using durable-good investments. These techniques have been important for understanding and analyzing the household purchase of new, relatively-untested appliance technologies (such as solar water heaters and more efficient refrigerators), new energy sources (such as solar photovoltaics), and capital-intensive conservation investments (such as increased home insulation, storm windows, and water heat wraps). In all of these cases, consumers face options in which a higher capital cost will purchase lower operating costs over the life of the particular pieces of equipment. We assume consumers evaluate these energy-using durables as they would any other investment. They compare and discount, over the life of the investments, the costs and financial benefits of alternatives and choose the option(s) offering the largest expected benefit.



Energy Efficiency Investments in the Home: Swiss Homeowners and Expectations about Future Energy Prices

Anna Alberini, Silvia Banfi, and Celine Ramseier

Year: 2013
Volume: Volume 34
Number: Number 1
DOI: 10.5547/01956574.34.1.3
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Abstract:
Using conjoint choice experiments, we surveyed 473 Swiss homeowners about their preferences for energy efficiency home renovations. We find that homeowners are responsive to the upfront costs of the renovation projects, government-offered rebates, savings in energy expenses, time horizon over which such savings would be realized, and thermal comfort improvement. The implicit discount rate is low, ranging from 1.5 to 3%, depending on model specification. This is consistent with Hassett and Metcalf (1993) and Metcalf and Rosenthal (1995), and with the fact that our scenarios contain no uncertainty. Respondents who feel completely uncertain about future energy prices are more likely to select the status quo (no renovations) in any given choice task and weight the costs of the investments more heavily than the financial gains (subsidies and savings on the energy bills). Renovations are more likely when respondents believe that climate change considerations are important determinants of home renovations.





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