Welcome to the new version of CaltechAUTHORS. Login is currently restricted to library staff. If you notice any issues, please email coda@library.caltech.edu
Published August 30, 2017 | Submitted
Report Open

Market Barriers to Conservation: Are Implicit Discount Rates Too High?

Abstract

This paper reconsiders whether implicit discount rates, generally cited as a market barrier to conservation, are really too high, and demonstrates that probabilistic choice studies of consumer durable purchases and hedonic housing price regression studies measure similar but non-identical discount factors. Four hedonic regression studies are reviewed which attempt to ascertain whether and to what extent the housing market capitalizes energy conservation investments. A theoretical model is presented which links the probabilistic choice and hedonic regression methods and shows how using results from both studies allows measurement of individual discount rates without bias. The paper identifies several factors which cause the degree of capitalization to differ from unity, resulting in consumer decisions which are rational from the individual perspective, but which can lead to low levels of social conservation.

Additional Information

This paper was presented at the Program on Workable Energy Regulation Conference on The Economics of Energy Conservation held at U.C. Berkeley on June 26, 1992. The comments of the discussants, Charles Lave and Steven Stoft, were greatly appreciated. I wish to acknowledge the research assistance of Kristina Sepetys and P. Scott Burton, and would like to thank Louis L. Wilde and Charles C. Cicchetti for their comments and suggestions.

Attached Files

Submitted - sswp802.pdf

Files

sswp802.pdf
Files (526.9 kB)
Name Size Download all
md5:cd9b400cc89e0980c48e193004c11682
526.9 kB Preview Download

Additional details

Created:
August 20, 2023
Modified:
January 14, 2024