Price premium for high-efficiency refrigerators and calculation of price-elasticities for close-substitutes: a methodology using hedonic pricing and demand systems

This article uses the hedonic 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 obtains 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 method presented here could be useful for policy design and analysis. Our results indicate that the demand for refrigerators with the highest energy-efficiency label is highly sensitive to price variations. (C) 2011 Elsevier Ltd. All rights reserved.