Individual discount rates and the purchase and utilization of energy-using durables
Abstract
This article presents a model of individual behavior in the purchase and utilization of energy-using durables. The tradeoff between capital costs for more energy efficient appliances and operating costs for the appliances is emphasized. Using data on both the purchase and utilization of room air conditioners, the model is applied to a sample of households. The utilization equation indicates a relatively low price elasticity. The purchase equation, based on a discrete choice model, demonstrates that individuals do trade off capital costs and expected operating costs. The results also show that individuals use a discount rate of about 20 percent in making the tradeoff decision and that the discount rate varies inversely with income.
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It is typical for consumers to highly discount future savings.
“This is not an issue specific to Iceland or the Nordics, indeed, it is typical for consumers to highly discount future savings (Allcott and Wozny, 2014;Hausman, 1979).”
From Understanding the socio-technical nexus of Nordic electric vehicle (EV) barriers: A qualitative discussion of range, price, charging and knowledge (2020) · cites this paper as Hausman, 1979
Private individuals are irrational over discount rates.
“A key aspect, is the irrationality of private individuals over discount rates (Allcott and Wozny, 2014;Hausman, 1979)”
From Understanding the socio-technical nexus of Nordic electric vehicle (EV) barriers: A qualitative discussion of range, price, charging and knowledge (2020) · cites this paper as Hausman, 1979
Consumers focus on capital cost of vehicles rather than total cost of ownership calculations, which favors ICEVs despite not being the least-costly option in the medium to long term.
“And for price, it is clear that consumers focus on capital cost of vehicles rather than on the total cost of ownership calculations, which favors ICEVs despite not being the least-costly option in the medium to long term.”
From Understanding the socio-technical nexus of Nordic electric vehicle (EV) barriers: A qualitative discussion of range, price, charging and knowledge (2020) · cites this paper as Hausman, 1979
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Anomalies in Intertemporal Choice: Evidence and an Interpretation
Loewenstein, G., & Prelec, D. (1992) · The Quarterly Journal of Economics · doi:10.2307/2118482 · Cited by 2,305 · see citing works
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Simulating the deep decarbonisation of residential heating for limiting global warming to 1.5 °C
Knobloch, F., Pollitt, H., Chewpreecha, U., Daioglou, V., & Mercure, J.-F. (2019) · Energy Efficiency · doi:10.1007/s12053-018-9710-0 · Cited by 6 · see citing works
- Authors
- Hausman, J. A.
- Corresponding author
- Hausman, Jerry A.
- Venue
- The Bell Journal of Economics
- Publisher
- JSTOR
- Published
- 1979
- Volume
- 10
- Issue
- 1
- Pages
- 33
- ISSN
- 0361-915X (ISSN-L)
- OpenAlex
- W1977890266
- Cited by
- 1,372
- References
- 0
- Citations by year
- 2026: 19 · 2025: 16 · 2024: 26 · 2023: 20 · 2022: 31 · 2021: 58 · 2020: 39 · 2019: 42 · 2018: 51 · 2017: 67 · 2016: 62 · 2015: 56 · 2014: 51 · 2013: 68 · 2012: 71
- FWCI
- 14.33
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- The Bell Journal of Economics (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- Topics
- Physical Sciences › Energy › Renewable Energy, Sustainability and the Environment › Energy, Environment, and Transportation Policies
- Physical Sciences › Environmental Science › Management, Monitoring, Policy and Law › Environmental Education and Sustainability
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Economic and Environmental Valuation
- Keywords
- discount rate, room air conditioners, capital costs, operating costs, energy efficiency, price elasticity, household energy consumption, discrete choice models
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