%0 Report
%K EES-EG
%A K Sydny Fujita
%D 2015
%T Estimating Price Elasticity using Market-Level Appliance Data
%2 LBNL-188289
%8 08/2015
%X <p>This report provides and update to and expansion upon our 2008 LBNL report “An Analysis<br />of the Price Elasticity of Demand for Appliances,” in which we estimated an average relative<br />price elasticity of -0.34 for major household appliances (Dale and Fujita 2008).<br />Consumer responsiveness to price change is a key component of energy efficiency policy<br />analysis; these policies influence consumer purchases through price both explicitly and<br />implicitly. However, few studies address appliance demand elasticity in the U.S. market and<br />public data sources are generally insufficient for rigorous estimation. Therefore, analysts<br />have relied on a small set of outdated papers focused on limited appliance types, assuming<br />long-term elasticities estimated for other durables (e.g., vehicles) decades ago are applicable<br />to current and future appliance purchasing behavior. We aim to partially rectify this problem<br />in the context of appliance efficiency standards by revisiting our previous analysis, utilizing<br />data released over the last ten years and identifying additional estimates of durable goods<br />price elasticities in the literature.<br />Reviewing the literature, we find the following ranges of market-level price elasticities:<br />-0.14 to -0.42 for appliances; -0.30 to -1.28 for automobiles; -0.47 to -2.55 for other durable<br />goods. Brand price elasticities are substantially higher for these product groups, with most<br />estimates -2.0 or more elastic. Using market-level shipments, sales value, and efficiency level<br />data for 1989-2009, we run various iterations of a log-log regression model, arriving at a<br />recommended range of short run appliance price elasticity between -0.4 and -0.5, with a<br />default value of -0.45.</p>