Consumer Myopia in Vehicle Purchases: Evidence from a Natural Experiment

Kenneth Gillingham, Sébastien Houde and Arthur van Benthem

No 25845, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: A central question in the analysis of fuel-economy policy is whether consumers are myopic with regards to future fuel costs. We provide the first evidence on consumer valuation of fuel economy from a natural experiment. We examine the short-run equilibrium effects of an exogenous restatement of fuel-economy ratings that affected 1.6 million vehicles. Using the implied changes in willingness-to-pay, we find that consumers act myopically: consumers are indifferent between $1 in discounted fuel costs and 15-38 cents in the vehicle purchase price when discounting at 4%. This myopia persists under a wide range of assumptions.

JEL-codes: D12 L62 Q4 (search for similar items in EconPapers)
Date: 2019-05
New Economics Papers: this item is included in nep-dcm and nep-ind
Note: EEE
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Citations: View citations in EconPapers (10)

Published as Kenneth T. Gillingham & Sébastien Houde & Arthur A. van Benthem, 2021. "Consumer Myopia in Vehicle Purchases: Evidence from a Natural Experiment," American Economic Journal: Economic Policy, vol 13(3), pages 207-238.

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Related works:
Journal Article: Consumer Myopia in Vehicle Purchases: Evidence from a Natural Experiment (2021)
Working Paper: Consumer myopia in vehicle purchases: evidence from a natural experiment (2019)
Working Paper: Consumer Myopia in Vehicle Purchases: Evidence from a Natural Experiment (2019)
Working Paper: Consumer Myopia in Vehicle Purchases: Evidence from a Natural Experiment (2019)
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