TY - JOUR AU - Gillingham, Kenneth AU - Houde, Sébastien AU - van Benthem, Arthur TI - Consumer Myopia in Vehicle Purchases: Evidence from a Natural Experiment JF - National Bureau of Economic Research Working Paper Series VL - No. 25845 PY - 2019 Y2 - May 2019 DO - 10.3386/w25845 UR - http://www.nber.org/papers/w25845 L1 - http://www.nber.org/papers/w25845.pdf N1 - Author contact info: Kenneth Gillingham School of Forestry and Environmental Studies Yale University 195 Prospect Street New Haven, CT 06511 Tel: 203/436-5465 Fax: 203/436-9135 E-Mail: kenneth.gillingham@yale.edu Sébastien Houde Department of Management, Technology, and Economics Centre for Energy Policy and Economics ETH Zurich Zurichbergstrasse 18, 8092 Zurich E-Mail: shoude@ethz.ch Arthur A. van Benthem The Wharton School University of Pennsylvania 327 Vance Hall 3733 Spruce Street Philadelphia, PA 19104 Tel: 215/898-3013 Fax: 215/898-7635 E-Mail: arthurv@wharton.upenn.edu M2 - featured in NBER digest on 2019-07-29 AB - 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. ER -