Are Consumers Myopic? Evidence from New and Used Car Purchases
AbstractWe investigate whether car buyers are myopic about future fuel costs. We estimate the effect of gasoline prices on short-run equilibrium prices of cars of different fuel economies. We then compare the implied changes in willingness-to-pay to the associated changes in expected future gasoline costs for cars of different fuel economies in order to calculate implicit discount rates. Using different assumptions about annual mileage, survival rates, and demand elasticities, we calculate a range of implicit discount rates similar to the range of interest rates paid by car buyers who borrow. We interpret this as showing little evidence of consumer myopia. (JEL D12, H25, L11, L62, L71, L81)
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Review.
Volume (Year): 103 (2013)
Issue (Month): 1 (February)
Find related papers by JEL classification:
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment
- L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
- L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Linn, Joshua, 2014. "Explaining the Adoption of Diesel Fuel Passenger Cars in Europe," Discussion Papers dp-14-08, Resources For the Future.
- Lint Barrage & Eric Chyn & Justine Hastings, 2014. "Advertising, Reputation, and Environmental Stewardship: Evidence from the BP Oil Spill," NBER Working Papers 19838, National Bureau of Economic Research, Inc.
- Mark R. Jacobsen & Arthur A. van Benthem, 2013. "Vehicle Scrappage and Gasoline Policy," NBER Working Papers 19055, National Bureau of Economic Research, Inc.
- Antonio M. Bento & Jonathan E. Hughes & Daniel T. Kaffine, 2012.
"Carpooling and Driver Responses to Fuel Price Changes: Evidence from Traffic Flows in Los Angeles,"
2012-06, Colorado School of Mines, Division of Economics and Business.
- Bento, Antonio M. & Hughes, Jonathan E. & Kaffine, Daniel, 2013. "Carpooling and driver responses to fuel price changes: Evidence from traffic flows in Los Angeles," Journal of Urban Economics, Elsevier, vol. 77(C), pages 41-56.
- Li, Shanjun & Linn, Joshua & Muehlegger, Erich, 2012.
"Gasoline Taxes and Consumer Behavior,"
Working Paper Series
rwp12-006, Harvard University, John F. Kennedy School of Government.
- Natalia Fabra & Mar Reguant, 2013. "Pass-through of Emissions Costs in Electricity Markets," NBER Working Papers 19613, National Bureau of Economic Research, Inc.
- Linn, Joshua, 2013.
"The Rebound Effect for Passenger Vehicles,"
dp-13-19-rev, Resources For the Future.
- Khanna, Shefali & Linn, Joshua, 2013. "Do Market Shares or Technology Explain Rising New Vehicle Fuel Economy?," Discussion Papers dp-13-29, Resources For the Future.
- Eliasson , Jonas & Proost, Stef, 2014. "Is sustainable transport policy sustainable?," Working papers in Transport Economics 2014:2, CTS - Centre for Transport Studies Stockholm (KTH and VTI).
- Sébastien Houde, 2014. "How Consumers Respond to Environmental Certification and the Value of Energy Information," NBER Working Papers 20019, National Bureau of Economic Research, Inc.
- James M. Sallee, 2013. "Rational Inattention and Energy Efficiency," NBER Working Papers 19545, National Bureau of Economic Research, Inc.
- Meghan R. Busse & Jorge M. Silva-Risso, 2010. ""One Discriminatory Rent" or "Double Jeopardy": Multicomponent Negotiation for New Car Purchases," American Economic Review, American Economic Association, vol. 100(2), pages 470-74, May.
- Klier, Thomas & Linn, Joshua, 2013. "Technological Change, Vehicle Characteristics, and the Opportunity Costs of Fuel Economy Standards," Discussion Papers dp-13-40, Resources For the Future.
- Are Consumers Myopic? Evidence from New and Used Car Purchases (AER 2013) in ReplicationWiki
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jane Voros) or (Michael P. Albert).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.