The Demand for Ethanol as a Gasoline Substitute

Soren Anderson

No 16371, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper estimates household preferences for ethanol as a gasoline substitute. I develop a theoretical model linking the shape of the ethanol demand curve to the distribution of price ratios at which individual households switch fuels. I estimate the model using data from many retail fueling stations. Demand is price-sensitive with a mean elasticity of 2.5-3.5. I find that preferences are heterogeneous with many households willing to pay a premium for ethanol. This reduces the simulated cost of an ethanol content standard, since some households choose ethanol without large subsidies; simulated costs are still high relative to likely environmental benefits.

JEL-codes: Q41 Q42 Q48 (search for similar items in EconPapers)
Date: 2010-09
Note: EEE
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Citations: View citations in EconPapers (6)

Published as Anderson, Soren T., 2012. "The demand for ethanol as a gasoline substitute," Journal of Environmental Economics and Management, Elsevier, vol. 63(2), pages 151-168.

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Journal Article: The demand for ethanol as a gasoline substitute (2012)
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