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

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  • Helfand, Gloria
  • Wolverton, Ann
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    Abstract

    How consumers evaluate trade-offs between the cost of buying additional fuel economy and the expected fuel savings that result is an important underlying determinant of the overall cost of national fuel economy standards. Models of vehicle choice are a means to predict the change in consumers' vehicle purchase patterns, as well as the effects of these changes on compliance costs and consumer surplus. This paper surveys the literature on vehicle 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, though there is insufficient evidence on the relative roles of these various hypotheses. Further research on the role of fuel economy in consumer vehicle purchases is needed to assist in understanding the welfare effects of fuel economy regulation.

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    File URL: http://dx.doi.org/10.1561/101.00000040
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    Bibliographic Info

    Article provided by now publishers in its journal International Review of Environmental and Resource Economics.

    Volume (Year): 5 (2011)
    Issue (Month): 2 (May)
    Pages: 103-146

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    Handle: RePEc:now:jirere:101.00000040

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    Web page: http://www.nowpublishers.com/

    Related research

    Keywords: Consumer behavior; Vehicle purchase decisions; Fuel economy; Energy paradox; Vehicle choice;

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    Cited by:
    1. McConnell, Virginia, 2013. "The New CAFE Standards: Are They Enough on Their Own?," Discussion Papers dp-13-14, Resources For the Future.
    2. Greene, David L. & Evans, David H. & Hiestand, John, 2013. "Survey evidence on the willingness of U.S. consumers to pay for automotive fuel economy," Energy Policy, Elsevier, vol. 61(C), pages 1539-1550.
    3. Kenneth Gillingham & Karen Palmer, 2014. "Bridging the Energy Efficiency Gap: Policy Insights from Economic Theory and Empirical Evidence," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 8(1), pages 18-38, January.
    4. Hackbarth, André & Madlener, Reinhard, 2013. "Willingness-to-Pay for Alternative Fuel Vehicle Characteristics: A Stated Choice Study for Germany," FCN Working Papers 20/2013, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN).

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