Consumer myopia in vehicle purchases: Evidence from a natural experiment

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Economics Working Paper Series ; No. 19/321

Classification and Topics

• Classification: Wirtschaft ; Consumer Economics: Empirical Analysis ; Business Taxes and Subsidies including sales and value-added (VAT) ; Production, Pricing, and Market Structure; Size Distribution of Firms ; Automobiles; Other Transportation Equipment; Related Parts and Equipment ; Mining, Extraction, and Refining: Hydrocarbon Fuels
• Subject: fuel economy ; vehicles ; myopia ; undervaluation ; regulation

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Gillingham, Kenneth ; Houde, Sébastien
• Event: Veröffentlichung
• (who): ETH Zurich, CER-ETH - Center of Economic Research
• (where): Zurich
• (when): 2019

Further information

• DOI: doi:10.3929/ethz-b-000342759
• Handle: http://hdl.handle.net/10419/207143
• Last update: 10.03.2025, 11:44 AM CET