Measuring the Willingness to Pay and Implicit Discount Rates for High-efficiency Refrigerators: Evidence from the Japan retail market

Author Name KONISHI Yoko (Senior Fellow, RIETI) / SAITO Takashi (Ministry of Economy, Trade and Industry) / ISHIKAWA Toshiki (Ministry of Economy, Trade and Industry)
Creation Date/NO. July 2018 18-J-023
Research Project Development of New Indicators for Service Sector Analysis and EBPM
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The "energy saving labeling program" was introduced in 2006 to the Japan retail market for the purpose of penetrating energy efficient home appliances. In this paper, we investigate the influence of two energy efficiency indices: (1) annual energy consumption (kWh) and (2) energy-saving achievement rate (%) included in the "energy-saving label" on the price and consumer purchasing for high-efficiency refrigerators. We use the point of sale (POS) data of the Japan refrigerators market for 2015 which account for approximately 76% of the domestic market sales share. First, by estimating the hedonic price model, we obtain the willingness to pay for the energy efficiency of refrigerators for each region and unit size. Second, based on the results, we examine the implicit discount rates for the energy saving benefits of high-efficiency refrigerators. The discount rate is 4.3%-7.8% for the index of (1) and 0.7%-10.7% for (2), which are lower than the 11%-300% from the previous studies. Our results suggest that consumers are not myopic when purchasing a refrigerator, and make decisions taking into consideration of the benefits of energy savings obtained during use. We conclude that the two energy efficiency indices contribute to the dispersion of energy-saving refrigerators.