Incremental/Hedonic Price Analysis: Potential as a Cost Effective Method of Tracking Market Progress over Time?

Lisa A. Skumatz and John Gardner, Skumatz Economic Research Associates, Inc.

Keywords

Abstract

Although it is a critical “indicator” for many energy efficiency programs, tracking market shares for efficient equipment is expensive and onerous. Sales (and even reliable shipment) data are – and will likely continue to be – difficult to obtain from retailers / manufacturers. The authors determined to explore the potential of alternative, parallel, and less expensive methods of indicating market progress that might monitor interim progress and allow expensive sales data to be collected less often. Basic economics (equilibria are reflected in sales and price) provided the authors with an idea to explore apparent price differentials as an additional tracking mechanism.

Skumatz Economic Research Associates, Inc. (SERA) developed a method to use a detailed statistical approach to examine the price premium associated with energy efficiency features and the Energy Star® logo on a range of appliances and residential lighting equipment. The goal was to monitor market progress in the premium associated with efficient equipment compared to standard equipment. The goal was to 1) track these changes and 2) monitor their relation to changes in other market indicators including market shares or sales, and models on display.

The net price premiums attributable to the Energy Star® logo (after controlling for the effects from other energy efficiency features) were estimated and tracked. The results showed that while the apparent differences for efficient measures are high, these differences (percent and dollar) decrease dramatically when the price differences and potentially value attributable to other features of the measure are accounted for. Results differed by appliance, and the varying results have different implications for the underlying programs and measures.