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
Englisch

Bibliographic citation
Series: CESifo Working Paper ; No. 7656

Classification
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
fuel economy
vehicles
myopia
undervaluation
regulation

Event
Geistige Schöpfung
(who)
Gillingham, Kenneth
Houde, Sébastien
van Benthem, Arthur A.
Event
Veröffentlichung
(who)
Center for Economic Studies and ifo Institute (CESifo)
(where)
Munich
(when)
2019

Handle
Last update
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

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