Consumer Myopia in Vehicle Purchases: Evidence from a Natural Experiment / Kenneth Gillingham, Sébastien Houde, Arthur van Benthem.

Format:

Book

Author/Creator:

Gillingham, Kenneth.

Contributor:

National Bureau of Economic Research.

Houde, Sébastien.

van Benthem, Arthur.

Series:

Working Paper Series (National Bureau of Economic Research) no. w25845.

NBER working paper series no. w25845

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Consumer Myopia in Vehicle Purchases

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2019.

Summary:

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.

Notes:

Print version record

May 2019.