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Energy Policy, Vol.23, No.9, 739-743, 1995
HOW HIGH ARE OPTION VALUES IN ENERGY-EFFICIENCY INVESTMENTS
High implicit discount rates in consumers' energy-efficiency investments have long been a source of controversy. In several recent papers, Hassett and Metcalf argue that the uncertainty and irreversibility attendant to such investments, and the resulting option value, account for this anomalously high implicit discounting. Using their model and data, we show that, to the contrary, their analysis falls well short of providing an explanation of this pattern.