Do consumers recognize the value of fuel economy? Evidence from used car prices and gasoline price fluctuations
James Sallee,
Sarah West and
Wei Fan
Journal of Public Economics, 2016, vol. 135, issue C, 61-73
Abstract:
Debate about the appropriate design of energy policy hinges critically on whether consumers might undervalue energy efficiency, due to myopia or some other manifestation of limited rationality. We contribute to this debate by measuring consumers' willingness to pay for fuel economy using a novel identification strategy and high quality microdata from wholesale used car auctions. We leverage differences in future fuel costs across otherwise identical vehicles that have different current mileage, and therefore different remaining lifetimes. By seeing how price differences across high and low mileage vehicles of different fuel economies change in response to shocks to the price of gasoline, we estimate the relationship between vehicle prices and future fuel costs. Our data suggest that used automobile prices move one for one with changes in present discounted future fuel costs, which implies that consumers fully value fuel economy.
Keywords: Fuel economy; Undervaluation; Gasoline prices; Energy efficiency (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (98)
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0047272716000049
Full text for ScienceDirect subscribers only
Related works:
Working Paper: Do Consumers Recognize the Value of Fuel Economy? Evidence from Used Car Prices and Gasoline Price Fluctuations (2015) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:135:y:2016:i:c:p:61-73
DOI: 10.1016/j.jpubeco.2016.01.003
Access Statistics for this article
Journal of Public Economics is currently edited by R. Boadway and J. Poterba
More articles in Journal of Public Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().