Estimating customer utility of energy efficiency standards for refrigerators
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A frequent argument against efficiency standards is that they prohibit products that represent optimal choices for customers and thus lead to reduced customer utility. In this paper we propose and test a method to estimate such losses. Conjoint analysis is used to estimate utility functions for individuals that have recently bought a refrigerator. The utility functions are used to calculate the individuals’ utility of all the refrigerators available in the market. Next the method is used to estimate losses due to energy efficiency standards that remove products from the market. The method is found to give accurate estimates that are consistent with other data on customer choices. Contrary to previous claims, we find that efficiency standards can lead to increased utility for the average customer. This is possible because customers do not make perfect choices in the first place.