Webinars in Economics of Environment, Energy and Transports
October 27th at 4pm on Zoom. It has a duration of 60 minutes, with questions at the end.
In order to attend the webinar, registration is mandatory. Please use the following link to access the registration form.
Sébastien Houde (Grenoble Ecole de Management)
Consumer Myopia in Vehicle Purchases: Evidence from a Natural Experiment
with Kenneth Gillingham and Arthur A. van Benthem
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 that provides exogenous variation in fuel-economy ratings. We examine the short-run equilibrium effects of a 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 16-39 cents in the purchase price when discounting at 4%. This undervaluation persists under a wide range of assumptions.
Read the paper (PDF)