TY  - JOUR
AU  - Anderson,Soren T.
TI  - The Demand for Ethanol as a Gasoline Substitute
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 16371
PY  - 2010
Y2  - September 2010
UR  - http://www.nber.org/papers/w16371
L1  - http://www.nber.org/papers/w16371.pdf
N1  - Author contact info:
Soren T. Anderson
Department of Economics
Marshall - Adams Hall, Office 18C
Michigan State University
East Lansing, MI 48824-1038
Tel: 517/355-0286
Fax: 517/432-1068
E-Mail: sta@msu.edu
AB  - This paper estimates household preferences for ethanol as a gasoline substitute. I develop a theoretical model linking the shape of the ethanol demand curve to the distribution of price ratios at which individual households switch fuels. I estimate the model using data from many retail fueling stations. Demand is price-sensitive with a mean elasticity of 2.5–3.5. I find that preferences are heterogeneous with many households willing to pay a premium for ethanol. This reduces the simulated cost of an ethanol content standard, since some households choose ethanol without large subsidies; simulated costs are still high relative to likely environmental benefits.
ER  -