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Automobile Fuel Economy: What Is It Worth?

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  • MOLLY ESPEY
  • SANTOSH NAIR

Abstract

The marginal value of increased automobile fuel economy is estimated using a hedonic model of 2001 model year automobiles sold in the United States. This value is then compared to the average expected lifetime fuel savings attributable to increased fuel economy. Results indicate that automobile buyers fully internalize fuel cost savings attributable to improved fuel economy at low discount rates, and may partially internalize other perceived benefits of improved fuel economy such as reduction in global warming or fossil fuel dependence.

Suggested Citation

  • Molly Espey & Santosh Nair, 2005. "Automobile Fuel Economy: What Is It Worth?," Contemporary Economic Policy, Western Economic Association International, vol. 23(3), pages 317-323, July.
    • Handle: RePEc:bla:coecpo:v:23:y:2005:i:3:p:317-323
    DOI: 10.1093/cep/byi024
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