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Price Premium for High-Efficiency Refrigerators and Calculation of Price-Elasticities for Close-Substitutes: Combining Hedonic Pricing and Demand Systems

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Author(s): Ibon Galarraga, David Heres Del Valle and Mikel González-Eguino

Date: 2011-08-30

Issue: 2011-07

  Download this working paper (290 KB.)



This article uses the hedonic pricing method to estimate the price premium paid for the highest energy-efficiency label (A+) in the refrigerators market of the Basque Autonomous Community (Spain). The estimated figure is 8.9% of the final price or about 60 euro, which represents one third of the energy savings that a consumer gets during the lifetime of a refrigerator with the highest energy-efficiency label. This figure is then combined with the linear version of the Almost Ideal Demand System (LA/AIDS) to obtain own and cross-price elasticities of demand. The information presented here is useful for policy design and analysis. The results indicate that the demand for refrigerators with the highest energy-efficiency label is highly sensitive to price variations.

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