NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Do Consumers Recognize the Value of Fuel Economy? Evidence from Used Car Prices and Gasoline Price Fluctuations

James M. Sallee, Sarah West, Wei Fan

NBER Working Paper No. 21441
Issued in July 2015
NBER Program(s):   EEE   PE

Debate about the appropriate design of energy policy hinges critically on whether consumers might undervalue energy efficiency, due to myopia or some other manifestation of limited rationality. We contribute to this debate by measuring consumers' willingness to pay for fuel economy using a novel identification strategy and high quality microdata from wholesale used car auctions. We leverage differences in future fuel costs across otherwise identical vehicles that have different current mileage, and therefore different remaining lifetimes. By seeing how price differences across high and low mileage vehicles of different fuel economies change in response to shocks to the price of gasoline, we estimate the relationship between vehicle prices and future fuel costs. Our data suggest that used automobile prices move one for one with changes in present discounted future fuel costs, which implies that consumers fully value fuel economy.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Access to NBER Papers

You are eligible for a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w21441

Published: James M. Sallee & Sarah E. West & Wei Fan, 2016. "Do consumers recognize the value of fuel economy? Evidence from used car prices and gasoline price fluctuations," Journal of Public Economics, . citation courtesy of

Users who downloaded this paper also downloaded* these:
Borenstein and Davis w21437 The Distributional Effects of U.S. Clean Energy Tax Credits
Atkin and Donaldson w21439 Who's Getting Globalized? The Size and Implications of Intra-national Trade Costs
Baten, Bianchi, and Moser w21442 Does Compulsory Licensing Discourage Invention? Evidence From German Patents After WWI
Moser, Ohmstedt, and Rhode w21443 Patent Citations and the Size of the Inventive Step - Evidence from Hybrid Corn
Lau and Rosen w21432 Are Universities Becoming More Unequal?
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us