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

Mitsutsugu Hamamoto ()
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Mitsutsugu Hamamoto: Dokkyo University

SN Business & Economics, 2023, vol. 3, issue 7, 1-19

Abstract: 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.

Keywords: Revealed preference; Stated preference; Implicit discount rate; Cognitive error; Attentiveness (search for similar items in EconPapers)
JEL-codes: D91 Q41 Q48 Q54 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s43546-023-00504-6

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