Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/201882 
Year of Publication: 
2019
Series/Report no.: 
CESifo Working Paper No. 7656
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
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.
Subjects: 
fuel economy
vehicles
myopia
undervaluation
regulation
JEL: 
D12
H25
L11
L62
L71
Q40
Document Type: 
Working Paper
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