IDEAS home Printed from https://ideas.repec.org/a/tpr/restat/v95y2013i4p1198-1211.html
   My bibliography  Save this article

Automakers' Short-Run Responses to Changing Gasoline Prices

Author

Listed:
  • Ashley Langer

    (University of Arizona)

  • Nathan H. Miller

    (U.S. Department of Justice)

Abstract

We provide empirical evidence that automobile manufacturers use cash incentives to offset how gasoline price fluctuations affect the expected fuel expenses of automobile buyers. Regressions based on a database of incentives over 2003 to 2006 suggest that on average, manufacturers offset 40% of the change in relative fuel costs between vehicles due to gasoline price fluctuations. The results highlight that carbon taxes and emissions trading programs likely would generate substantial substitution within vehicle classes, and studies that ignore manufacturer discounting likely underestimate consumer demand for fuel economy. The results also have implications for the optimal design of feebate programs. © 2013 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • Ashley Langer & Nathan H. Miller, 2013. "Automakers' Short-Run Responses to Changing Gasoline Prices," The Review of Economics and Statistics, MIT Press, vol. 95(4), pages 1198-1211, October.
    • Handle: RePEc:tpr:restat:v:95:y:2013:i:4:p:1198-1211
    as

    Download full text from publisher

    File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/REST_a_00297
    File Function: link to full text PDF
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jeremy Bertomeu & John Harry Evans & Mei Feng & Ayung Tseng, 2021. "Tacit Collusion and Voluntary Disclosure: Theory and Evidence from the U.S. Automotive Industry," Management Science, INFORMS, vol. 67(3), pages 1851-1875, March.
    2. Jeffrey T. Macher & Nathan H. Miller & Matthew Osborne, 2021. "Finding Mr. Schumpeter: technology adoption in the cement industry," RAND Journal of Economics, RAND Corporation, vol. 52(1), pages 78-99, March.
    3. Soren T. Anderson & Ryan Kellogg & Ashley Langer & James M. Sallee, 2015. "The Intergenerational Transmission of Automobile Brand Preferences," Journal of Industrial Economics, Wiley Blackwell, vol. 63(4), pages 763-793, December.
    4. Antonio Moreno & Christian Terwiesch, 2017. "The Effects of Product Line Breadth: Evidence from the Automotive Industry," Marketing Science, INFORMS, vol. 36(2), pages 254-271, March.
    5. Mathias Reynaert, 2021. "Abatement Strategies and the Cost of Environmental Regulation: Emission Standards on the European Car Market," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(1), pages 454-488.
    6. Verboven, Frank & Grigolon, Laura & Reynaert, Mathias, 2014. "Consumer valuation of fuel costs and the effectiveness of tax policy: Evidence from the European car market," CEPR Discussion Papers 10301, C.E.P.R. Discussion Papers.
    7. Leard, Benjamin & Linn, Joshua & Springel, Katalin, 2019. "Pass-Through and Welfare Effects of Regulations that Affect Product Attributes," RFF Working Paper Series 19-07, Resources for the Future.
    8. Alberini, Anna & Horvath, Marco & Vance, Colin, 2022. "Drive less, drive better, or both? Behavioral adjustments to fuel price changes in Germany," Resource and Energy Economics, Elsevier, vol. 68(C).
    9. Mark Miller & Anna Alberini, 2015. "Sensitivity of price elasticity of demand to aggregation, unobserved heterogeneity, price trends, and price endogeneity: Evidence from U.S. Data," CER-ETH Economics working paper series 15/223, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    10. Doremus, Jacqueline & Helfand, Gloria & Liu, Changzheng & Donahue, Marie & Kahan, Ari & Shelby, Michael, 2019. "Simpler is better: Predicting consumer vehicle purchases in the short run," Energy Policy, Elsevier, vol. 129(C), pages 1404-1415.
    11. Levinson, Arik, 2017. "Environmental protectionism: The case of CAFE," Economics Letters, Elsevier, vol. 160(C), pages 20-23.
    12. Marrouch, Walid & Mourad, Jana, 2019. "Effect of gasoline prices on car fuel efficiency: Evidence from Lebanon," Energy Policy, Elsevier, vol. 135(C).
    13. Alberini, Anna & Di Cosmo, Valeria & Bigano, Andrea, 2019. "How are fuel efficient cars priced? Evidence from eight EU countries," Energy Policy, Elsevier, vol. 134(C).
    14. Adam Copeland, 2014. "Intertemporal substitution and new car purchases," RAND Journal of Economics, RAND Corporation, vol. 45(3), pages 624-644, September.
    15. Frankel, David M., 2015. "Insuring Customers of a Unionized Firm Against Loss of Network Benefits," Staff General Research Papers Archive 38580, Iowa State University, Department of Economics.
    16. Liao Wang & Jin Yao & Xiaowei Zhang, 2022. "How Does Risk Hedging Impact Operations? Insights from a Price-Setting Newsvendor Model," Papers 2201.01026, arXiv.org, revised Jun 2023.
    17. D’Haultfœuille, Xavier & Durrmeyer, Isis & Février, Philippe, 2016. "Disentangling sources of vehicle emissions reduction in France: 2003–2008," International Journal of Industrial Organization, Elsevier, vol. 47(C), pages 186-229.
    18. Shanjun Li & Junji Xiao & Yimin Liu, 2015. "The Price Evolution in China's Automobile Market," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 24(4), pages 786-810, October.
    19. Alberini, Anna & Horvath, Marco, 2021. "All car taxes are not created equal: Evidence from Germany," Energy Economics, Elsevier, vol. 100(C).
    20. Sallee, James M. & West, Sarah E. & Fan, Wei, 2016. "Do consumers recognize the value of fuel economy? Evidence from used car prices and gasoline price fluctuations," Journal of Public Economics, Elsevier, vol. 135(C), pages 61-73.
    21. Leard, Benjamin, 2018. "Consumer inattention and the demand for vehicle fuel cost savings," Journal of choice modelling, Elsevier, vol. 29(C), pages 1-16.
    22. Frankel, David M., 2014. "Optimal Insurance for Small Stakeholders," Staff General Research Papers Archive 37551, Iowa State University, Department of Economics.
    23. Leard, Benjamin & Linn, Joshua & Springel, Katalin, 2023. "Vehicle Attribute Tradeoffs and the Distributional Effects of US Fuel Economy and Greenhouse Gas Emissions Standards," RFF Working Paper Series 23-04, Resources for the Future.
    24. Miller, Mark & Alberini, Anna, 2016. "Sensitivity of price elasticity of demand to aggregation, unobserved heterogeneity, price trends, and price endogeneity: Evidence from U.S. Data," Energy Policy, Elsevier, vol. 97(C), pages 235-249.

    More about this item

    Keywords

    automobile prices; gasoline prices; environmental policy;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L9 - Industrial Organization - - Industry Studies: Transportation and Utilities
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tpr:restat:v:95:y:2013:i:4:p:1198-1211. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kelly McDougall (email available below). General contact details of provider: https://direct.mit.edu/journals .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.