A note on the energy-efficiency investments of an expected cost minimizer

This paper analyzes a consumerʹs choice between a high-efficiency and a low-efficiency version of an energy-using durable when the expected lifetimes of the two versions differ. A (small) difference in expected lifetimes may induce entirely different implications for the behavior of a cost minimizing consumer, as compared to the case with equal expected lifetimes. The result supplements the explanations for the extremely high discount rates that have been reported for energy efficiency investments. We also provide sufficient conditions for the existence of a reservation property, both in the case of deterministic and of random lifetimes.