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

The research uses hedonic pricing to determine that A+ refrigerators in the Basque Autonomous Community carry a price premium of 8.9% (approximately 60 euro), which is only one-third of the potential lifetime energy savings. By combining this with a Linear Almost Ideal Demand System (LA/AIDS), the study finds that demand for high-efficiency refrigerators is significantly more price-elastic (ranging from -0.9 to -2.1) than demand for regular refrigerators (-0.25 to -0.75).

• The price premium for refrigerators with the highest energy-efficiency label (A+) in the Basque Autonomous Community is estimated at 8.9% of the final price, which equates to approximately 60 euro based on an average price of 658 euro.
• The market price premium for A+ refrigerators is significantly lower than the actual energy savings a consumer would realize over the appliance's lifetime; the discounted savings of substituting an A label fridge for an A+ one is 163 euro, making the market premium only about one-third of the energy savings premium.
• Demand for the most energy-efficient (A+) refrigerators is much more sensitive to price changes than demand for refrigerators with lower energy efficiency labels.
• The own price elasticity of demand for A+ refrigerators is estimated to range from -0.9 to -2.1, whereas the own price elasticity for regular refrigerators is estimated between -0.25 and -0.75.
• The cross-price elasticity of demand between regular and high energy-efficiency refrigerators is relatively low, ranging from 0.01 to 0.10, suggesting that price changes in one type of refrigerator affect the demand for the other only negligibly.

APA

Galarraga, I., Del Valle, D. H., & González-Eguino, M. (2011). Price Premium for High-Efficiency Refrigerators and Calculation of Price-Elasticities for Close-Substitutes: Combining Hedonic Pricing and Demand Systems. Basque Centre for Climate Change. https://www.bc3research.org/h6T8Uy8Nm4gFs0O/201108301036361207368790.pdf

Chicago

Galarraga, Ibon, David Heres Del Valle, and Mikel González-Eguino. Price Premium for High-Efficiency Refrigerators and Calculation of Price-Elasticities for Close-Substitutes: Combining Hedonic Pricing and Demand Systems. Basque Centre for Climate Change, 2011. https://www.bc3research.org/h6T8Uy8Nm4gFs0O/201108301036361207368790.pdf.

Wikipedia

{{cite report |last1=Galarraga |first1=Ibon |last2=Del Valle |first2=David Heres |last3=González-Eguino |first3=Mikel |title=Price Premium for High-Efficiency Refrigerators and Calculation of Price-Elasticities for Close-Substitutes: Combining Hedonic Pricing and Demand Systems |publisher=Basque Centre for Climate Change |date=August 2011 |url=https://www.bc3research.org/h6T8Uy8Nm4gFs0O/201108301036361207368790.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{galarraga2011price, author = {Galarraga, Ibon and Del Valle, David Heres and González-Eguino, Mikel}, title = {{Price Premium for High-Efficiency Refrigerators and Calculation of Price-Elasticities for Close-Substitutes: Combining Hedonic Pricing and Demand Systems}}, institution = {Basque Centre for Climate Change}, year = {2011}, month = aug, url = {https://www.bc3research.org/h6T8Uy8Nm4gFs0O/201108301036361207368790.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }