Arbeitspapier
Consumer myopia in vehicle purchases: evidence from a natural experiment
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.
- Language
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Englisch
- Bibliographic citation
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Series: CESifo Working Paper ; No. 7656
- Classification
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Wirtschaft
Consumer Economics: Empirical Analysis
Business Taxes and Subsidies including sales and value-added (VAT)
Production, Pricing, and Market Structure; Size Distribution of Firms
Automobiles; Other Transportation Equipment; Related Parts and Equipment
Mining, Extraction, and Refining: Hydrocarbon Fuels
Energy: General
- Subject
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fuel economy
vehicles
myopia
undervaluation
regulation
- Event
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Geistige Schöpfung
- (who)
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Gillingham, Kenneth
Houde, Sébastien
van Benthem, Arthur A.
- Event
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Veröffentlichung
- (who)
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Center for Economic Studies and ifo Institute (CESifo)
- (where)
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Munich
- (when)
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2019
- Handle
- Last update
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10.03.2025, 11:42 AM CET
Data provider
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Object type
- Arbeitspapier
Associated
- Gillingham, Kenneth
- Houde, Sébastien
- van Benthem, Arthur A.
- Center for Economic Studies and ifo Institute (CESifo)
Time of origin
- 2019