Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/207143
Year of Publication: 
2019
Series/Report no.: 
Economics Working Paper Series No. 19/321
Publisher: 
ETH Zurich, CER-ETH - Center of Economic Research, Zurich
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
Q4
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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