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

Dubin, Jeffrey A. (1992) Market Barriers to Conservation: Are Implicit Discount Rates Too High? Social Science Working Paper, 802. California Institute of Technology , Pasadena, CA. (Unpublished)

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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.

Item Type:Report or Paper (Working Paper)
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.
Group:Social Science Working Papers
Series Name:Social Science Working Paper
Issue or Number:802
Record Number:CaltechAUTHORS:20170829-140258761
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:80913
Deposited By: Jacquelyn Bussone
Deposited On:30 Aug 2017 17:45
Last Modified:03 Oct 2019 18:36

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