Modelling the dynamics of appliance price-efficiency distributions

Panel: 6. Appliances, product policy and ICT

This is a peer-reviewed paper.

Author:
Robert Van Buskirk, Lawrence Berkeley National Laboratory, USA

Abstract

We provide a set of equations for modeling the dynamics of the price-efficiency relationship in appliance markets. We use high resolution market data from Europe and the US to develop equations that describe the coupling between the adoption of efficient appliances and their price evolution. These equations describe the time dependent behavior of both the efficiency distribution (i.e. how many appliances are sold at or above a particular efficiency level) and the price evolution as a function of efficiency. We find evidence that price evolves according to two coupled “learning curves.” One learning curve is that for the base technology, where the price declines according to the cumulative experience with respect to the product. The other learning curve is for the incremental technology, where the decline in price scales with the cumulative experience at or above a new efficiency level. By developing equations that couple the two learning curve equations with the adoption dynamics we develop a model that fits the empirical price and sales data.