Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/202377
Authors: 
Langer, Ashley
Miller, Nathan H.
Year of Publication: 
2008
Series/Report no.: 
EAG Discussion Paper 08-11
Abstract: 
The relationship between gasoline prices and the demand for vehicle fuel efficiency is important for environmental policy but poorly understood in the academic literature. We provide empirical evidence that automobile manufacturers price as if consumers respond to gasoline prices. We derive a reduced-form regression equation from theoretical micro-foundations and estimate the equation with nearly 300,000 vehicle-week-region observations over the period 2003-2006. We find that vehicle prices generally decline in the gasoline price. The decline is larger for inefficient vehicles, and the prices of particularly efficient vehicles actually rise. Structural estimation that ignores these effects underestimates consumer preferences for fuel efficiency.
Subjects: 
Automobiles
Gasoline
Consumer Preference
Demand
Fuel Efficiency
JEL: 
L11
Q48
Q52
Document Type: 
Working Paper

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