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High Frequency Evidence on the Demand for Gasoline

Author

Listed:
  • Laurence Levin
  • Matthew S. Lewis
  • Frank A. Wolak

Abstract

Daily city-level expenditures and prices are used to estimate the price responsiveness of gasoline demand in the United States. Using a frequency of purchase model that explicitly acknowledges the distinction between gasoline demand and gasoline expenditures, the price elasticity of demand is consistently found to be an order of magnitude larger than estimates from recent studies using more aggregated data. Estimating demand using higher levels of spatial and temporal aggregation is shown to produce increasingly inelastic estimates. A decomposition is then developed and implemented to understand the relative importance of several different factors in explaining this result.

Suggested Citation

  • Laurence Levin & Matthew S. Lewis & Frank A. Wolak, 2017. "High Frequency Evidence on the Demand for Gasoline," American Economic Journal: Economic Policy, American Economic Association, vol. 9(3), pages 314-347, August.
    • Handle: RePEc:aea:aejpol:v:9:y:2017:i:3:p:314-47
    Note: DOI: 10.1257/pol.20140093
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    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • Q35 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Hydrocarbon Resources

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