Estimating the price elasticity of fuel demand with stated preferences derived from a situational approach

Reinhard Hössinger, Christoph Link, Axel Sonntag and Juliane Stark

Transportation Research Part A: Policy and Practice, 2017, vol. 103, issue C, 154-171

Abstract: An evidence-based policy debate about future fuel demand requires reliable estimates for fuel price elasticities. Such predictions are often based on revealed preference (RP) data. However, this procedure will only yield reliable results in the absence of severe structural discontinuities. In order to overcome this potential limitation we used a situational stated preference (SP) survey to estimate the response to hypothetical fuel price changes beyond the scope of previous observations. We elicit fuel price elasticities for price increases up to four Euros per liter and find that the situational approach predicts the actual responses to previously observed fuel price changes very well. We conclude that applying a situational approach is particularly useful, if behavioral predictions for unprecedented (non-monetary) policy interventions or supply side shocks are of interest that go beyond the reach of standard RP approaches.

Keywords: Price elasticities; Fuel demand; Stated preference; Choice experiment; Discrete choice modelling (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (10)

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DOI: 10.1016/j.tra.2017.06.001

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