What Do Consumers Believe About Future Gasoline Prices?
A full understanding of how gasoline prices affect consumer behavior frequently requires information on how consumers forecast future gasoline prices. We provide the first evidence on the nature of these forecasts by analyzing two decades of data on gasoline price expectations from the Michigan Survey of Consumers. We find that average consumer beliefs are typically indistinguishable from a no-change forecast, justifying an assumption commonly made in the literature on consumer valuation of energy efficiency. We also provide evidence on circumstances in which consumer forecasts are likely to deviate from no-change and on significant cross-consumer forecast heterogeneity.
We thank Richard Curtin for guidance in using the MSC data. For helpful comments, we also thank Hunt Allcott, Severin Borenstein, Liran Einav, Lutz Kilian, Tim Vogelsang, Florian Zettelmeyer, and seminar participants at the ASSA meetings, Columbia University, Iowa State University, Michigan State University, Rice University, University of California Berkeley, University of California Davis, University of California Energy Institute, University of California Santa Barbara, University of Houston, and University of Illinois. We gratefully acknowledge financial support from the California Energy Commission. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Anderson, Soren T. & Kellogg, Ryan & Sallee, James M., 2013. "What do consumers believe about future gasoline prices?," Journal of Environmental Economics and Management, Elsevier, vol. 66(3), pages 383-403. citation courtesy of