Consumer Myopia in Vehicle Purchases: Evidence from a Natural Experiment

Gillingham, Kenneth; Houde, Sébastien; Benthem, Arthur van

doi:10.2139/ssrn.3422237

Cited by 5 publications

(8 citation statements)

References 22 publications

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“…Moreover, the reaction to the vehicle price is more pronounced, which is in line with previous and recent ndings on myopic car consumers (i.e. (Gillingham et al 2021, Grigolon et al 2018). e discrepancy between the upfront cost valuation and the future variable cost valuation becomes more pronounced once we control for price endogeneity.…”

Section: Regression Resultssupporting

confidence: 91%

“…First, the estimation of demand on the car market in general (Berry, Levinsohn, & Pakes 1995, Train & Winston 2007, Gillingham, Iskhakov, Munk-Nielsen, Rust, & Schjerning 2019 and agents' preferences for EVs and HVs in particular (Xing et al 2021, Egnér & Trosvik 2018 with our work closely related to Huse & Koptyug (2021) from a methodological point of view. Second, the valuation of future variable costs relative to the valuation of up-front costs (Grigolon, Reynaert, & Verboven 2018, Gillingham, Houde, & Van Benthem 2021. Most empirical studies use fuel price variation to assess whether or not an energy paradox in the valuation of fuel costs exists.…”

Section: Introductionmentioning

confidence: 99%

“…Most empirical studies use fuel price variation to assess whether or not an energy paradox in the valuation of fuel costs exists. While Grigolon et al (2018) nd only slight undervaluation of fuel costs relative to vehicle prices in a structural estimation of purchases in Europe, Gillingham et al (2021) use a quasi-experimental se ing and nd quite substantial consumer myopia. Similarly, Huse & Koptyug (2021) nd that both future fuel costs and vehicle registration taxes are undervalued in comparison to upfront costs with registration taxes presenting the strongest undervaluation.…”

Section: Introductionmentioning

confidence: 99%

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Environmental, Redistributive and Revenue Effects of Policies Promoting Fuel Efficient and Electric Vehicles

Bigler

Rădulescu

2022

SSRN Journal

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Section: Regression Resultssupporting

confidence: 91%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Environmental, Redistributive and Revenue Effects of Policies Promoting Fuel Efficient and Electric Vehicles

Bigler

Rădulescu

2022

SSRN Journal

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“…When r = 1 the representative agent correctly values fuel costs, whereas when r < 1 the representative agent undervalues the actual savings from fuel-economy improvements. The empirical literature that provides estimates for r continues to evolve, with some studies (e.g., Leard, Linn, and Zhou 2018;Gillingham, Houde, and van Benthem 2019) suggesting substantial amounts of undervaluation, and other studies (e.g., Busse, Knittel, and Zettelmeyer 2013;Sallee, West, and Fan 2016) pointing to close to full valuation. Allcott and Wozny (2014) find modest amounts of undervaluation.…”

Section: A Basic Assumptionsmentioning

confidence: 99%

Estimating the Costs and Benefits of Fuel-Economy Standards

Bento¹,

Jacobsen²,

Knittel³

et al. 2020

Environmental and Energy Policy and the Economy

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Fuel-economy standards for new vehicles are a primary policy instrument in many countries to reduce the carbon footprint of the transportation sector. These standards have many channels of costs and benefit, impacting sales, composition, vehicle attributes, miles traveled and externalities in the new-car fleet, as well as the composition and size of the used fleet. We develop a tractable analytical framework to examine the welfare effects of fuel-economy standards, and apply it to the recent government proposal to roll back fuel-economy standards. We find that our combined, multi-market vehicle choice model implies that the proposal would increase the size of the vehicle fleet over time, and also generates smaller welfare gains than models with a less rich structure of the vehicle market, such as the one used in the analysis associated with the 2018 Notice of Proposed Rulemaking (NPRM) announcement. The disparities across the two models appear to result from the absence of feedback effects in the NPRM analysis. We stress the importance of instead using a multi-market vehicle choice model to provide the most accurate predictions of costs and benefits. We also derive bounds that can serve as a check on the theoretical consistency of such analyses, and that offer insights into the magnitudes of potential errors resulting from imperfect multi-market integration.

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“…Until now, with few exceptions, the evidence for whether drivers appropriately value future fuel savings has come from expected savings of typical drivers. Some researchers using that strategy have found the fuel economy premium to be less than the present discounted value of expected future savings, suggesting that on average, car buyers make mistakes by purchasing insufficiently fuel-efficient cars (Allcott and Wozny 2014;Gillingham et al 2019;Grigolon et al 2018). Others find the premium approximately equal to the discounted future savings, suggesting that on average, buyers are not mistakenly purchasing too little or too much fuel efficiency (Busse et al 2013;Sallee et al 2016).…”

mentioning

confidence: 99%