Availability and Pricing of ENERGY STAR Room Air Conditioners

Many appliance market transformation programs offer customer incentives in order to promote the purchase of ENERGY STAR ® room air conditioners (RACs). Because sales of RAC units are highly seasonal, it is important to understand seasonal availability and its potential effects on pricing. This research stemmed from the observation that the market share of ENERGY STAR-labeled RACs is typically higher in the third quarter of the year than in the second quarter. One hypothesis was that this trend may be due to consumers selecting cheaper non-ENERGY STAR models when they are available at the beginning of the summer season, and more expensive ENERGY STAR models toward the end of the season when the alternative non-ENERGY STAR models are sold out. Hence the research team collected price and feature information on models available at Massachusetts retailers in May and August of 2004. A regression analysis performed on these data found that the ENERGY STAR label adds about $39 to the price of a RAC unit, and that, overall, units sold in the third quarter have a price discount of about $16. However, the price difference between ENERGY STAR and non-ENERGY STAR models does not substantially differ from one quarter to another. Hence retailers do not appear to be “gaming” the incentives offered by program sponsors, which are only available during the second quarter. In addition, program incentive levels ($25 in 2004) appear to be reasonable, representing about two-thirds of the incremental cost of an ENERGY STAR model.