On dynamic standards for energy efficiency in differentiated duopoly

Peter Michaelis () and Thomas Ziesemer ()
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Peter Michaelis: University of Augsburg, Department of Economics
Thomas Ziesemer: University of Augsburg, Department of Economics

No 325, Discussion Paper Series from Universitaet Augsburg, Institute for Economics

Abstract: We consider a two-periods-model of differentiated duopoly. Firms produce an en-ergy consuming household durable differentiated by its energy efficiency. Consumers differ by the weight they apply to their future energy costs when deciding which product to buy. In line with the Japanese Top Runner Program, the regulator introduces a minimum efficiency standard in period t=2 which is fixed according to the efficiency of the product supplied by the high efficiency firm in t=1. We show that in t=1 both firms supply lower efficiency products and the high efficiency firm gains in market share and profits. In t=2 these effects are reversed. Calculated over both periods, total energy consumption does not change. Although there is no ecological effect, total welfare increases because price competition becomes tighter and the cost savings accruing to the consumers exceed the firms’ losses in profits.

Keywords: energy efficiency standards; product differentiation; duopoly; regulation (search for similar items in EconPapers)
JEL-codes: L13 Q48 Q58 (search for similar items in EconPapers)
Date: 2015-11
New Economics Papers: this item is included in nep-bec, nep-com, nep-ene, nep-ind and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:aug:augsbe:0325

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