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Estimating consumers’ discount rates in energy-saving investment decisions: a comparison of revealed and stated approaches

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  • Mitsutsugu Hamamoto

    (Dokkyo University)

Abstract

This paper investigates the relation between estimation techniques and the estimates of consumers’ discount rates. In an earlier paper, the author estimated the average value of discount rates using direct elicitation, which was found to be 50.8%. In this paper, consumers’ discount rates adopted in purchasing room air conditioners are estimated using revealed-preference data. Estimates using hedonic pricing and qualitative choice models indicate discount rates of 13.6% and 10.7%, respectively. The results reveal that the rate estimated using direct elicitation is four- or five-fold the rate estimated using hedonic pricing method or qualitative choice analysis. A possible reason for this is that consumers make cognitive errors and desire unrealistically high returns from the use of energy-efficient models. This paper also examines how consumers’ attentiveness to energy efficiency affects their discount rates, finding that inattentiveness may cause the adoption of higher discount rates.

Suggested Citation

  • Mitsutsugu Hamamoto, 2023. "Estimating consumers’ discount rates in energy-saving investment decisions: a comparison of revealed and stated approaches," SN Business & Economics, Springer, vol. 3(7), pages 1-19, July.
    • Handle: RePEc:spr:snbeco:v:3:y:2023:i:7:d:10.1007_s43546-023-00504-6
    DOI: 10.1007/s43546-023-00504-6
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    More about this item

    Keywords

    Revealed preference; Stated preference; Implicit discount rate; Cognitive error; Attentiveness;
    All these keywords.

    JEL classification:

    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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