How Regulations Can Succeed Where Taxes Do Not: An Examination of Automobile Fuel Efficiency
AbstractIn 1975 the United States government required automobile manufacturers to increase the corporate average fuel economy of their products. Why were such CAFE regulations more effective than increases in the price of gasoline in improving fuel economy? Our answer focuses on myopia by consumers, myopia by producers, and the rational incentive to delay irreversible investments.
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Date of creation: 08 Jun 1994
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- D6 - Microeconomics - - Welfare Economics
- D7 - Microeconomics - - Analysis of Collective Decision-Making
- H - Public Economics
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