Consumers' response to price increases: Evidence from gasoline markets

Ilona Tsanko

No 24-020, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: Understanding how consumers respond to price increases is key when designing price-related policies. Using microdata on vehicle usage and paid fuel prices, I analyze consumers' response, focusing on three channels of mitigation: distance driven, fuel efficiency, and search. On average, consumers mitigate 38 percent of a price increase through these channels. Reducing distance driven is the primary channel of mitigation. Increased search efforts mitigate up to 11 percent of a price increase. Response levels vary significantly with newer vehicles' owners mitigating up to 88 percent of a price increase, while older vehicle owners achieve can mitigate up to 45 percent.

Keywords: Demand response; Gasoline prices; Consumers search; Fuel consumption (search for similar items in EconPapers)
JEL-codes: D12 L91 L98 Q41 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-ene and nep-tre
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:289454

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