Is There an Energy Paradox in Fuel Economy? A Note on the Role of Consumer Heterogeneity and Sorting Bias
AbstractPrevious literature finds that consumers tend to undervalue discounted future energy costs in their purchase decisions for energy-using durables. We argue that this finding could result from ignoring consumer heterogeneity in empirical analyses as opposed to true undervaluation. In the context of automobile demand, we show that, if not accounted for, consumer heterogeneity could lead to sorting, which in turn biases toward zero the estimate of marginal willingness to pay for discounted future fuel costs.
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Bibliographic InfoPaper provided by Resources For the Future in its series Discussion Papers with number dp-10-56.
Date of creation: 24 Nov 2010
Date of revision:
energy paradox; fuel economy; consumer heterogeneity;
Other versions of this item:
- Bento, Antonio M. & Li, Shanjun & Roth, Kevin, 2012. "Is there an energy paradox in fuel economy? A note on the role of consumer heterogeneity and sorting bias," Economics Letters, Elsevier, vol. 115(1), pages 44-48.
- Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
- L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General
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