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Abstract

The empirical literature on the energy efficiency gap concentrates on demand inefficiencies in the energy-using durables markets and finds evidence that consumers underestimate future energy costs when purchasing a new appliance. We take a broader view and also consider the impact of imperfect competition. Using data on the UK refrigerator market (2002–2007), we find that the average energy consumption of appliances sold during this period was only 7.2% higher than what would have been observed under a scenario with a perfectly competitive market and non-myopic consumers. One reason for this small gap is that market power actually reduces energy use.

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