Discount Factor for Durable Goods: Evidence from the Spanish Automobile Market

Raúl Bajo-Buenestado

International Journal of Applied Behavioral Economics (IJABE), 2015, vol. 4, issue 3, 1-21

Abstract: Incentives for car purchase have been a common concern for politicians in Spain. In this paper, the author wants to focus on two recent policies: Plan VIVE and Plan 2000e, introduced in 2008 and 2009 respectively. The data on car sales in Spain show that after the introduction of the Plan 2000e there was a significant increase in the number of vehicles sold in Spain. But that seems quite contradictory with the features of these plans: if one assumes an average consumer, who borrows money at a certain interest and that repays it in several years, it can be seen that actually it is possible to save more money using the Plan VIVE rather than the Plan 2000e. Provided is evidence to support that the key to understand this puzzle is time preference: car purchase, as many other durable goods, has a very strong intertemporal discount factor. The hypothesis is demonstrated by the fact that, at least in Spain, people prefer an initial lump-sum payment in order to purchase a car rather than a financial program with better conditions.

Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:igg:jabe00:v:4:y:2015:i:3:p:1-21

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