Production functions for house temperatures: Problems and issues

Housing market capitalization of thermal integrity

“…The economic relationships that affect residential space heating are relevant to this analysis, because of their role in the valuation of energy saving durable goods. These relationships were explained by Scott (1980) with a four-quadrant consumption model, shown in Figure 2. 1. This model presents the house as a firm which produces heat levels.…”

“…While this issue has been discussed (Collins and Gray, 1983; Scott and Capper, 1983), the form of this production function has not yet been identified empirically. Quadrant IV shows that substantially beyond 0°F, relatively high amounts of fuel inputs are necessary to increase heat levels, implying a low marginal product for fuel at low heat levels.…”

“…The intercept, d, is not zero because of the fixed charge associated with utility service. Scott, 1980: 132).…”