Evaluating the Consumer Response to Fuel Economy: A Review of the Literature

In modeling how the U.S. market responds to changes in national fuel economy standards, the question of how consumers evaluate trade-offs between the cost of consuming more fuel economy than they would otherwise choose and the expected fuel savings that result is potentially quite important. Consumer vehicle choice models are a means to predict the change in vehicle purchase patterns, as well as the effects of these changes on compliance costs and consumer surplus. This paper surveys the literature on consumer choice models and finds a wide range in methods and results. A large puzzle raised is whether automakers build into their vehicles as much fuel economy as consumers are willing to purchase. This paper examines possible reasons why there may be a gap between the amount consumers are willing to pay for fuel economy and the amount that automakers provide. Submitted August, 2009. Resubmitted April, 2011