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Rational habits in gasoline demand

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  • Scott, K. Rebecca

Abstract

The dynamics of demand for energy goods such as gasoline are complicated by investment decisions and behavioral habits. Both types of complication can be captured by a habits model, in which past consumption enters into an agent's current utility function. If the agent is forward-looking, or ‘rational’, then habits imply his consumption of the habit-forming good will be sensitive to his expectation of future market conditions, in particular future prices. This sensitivity implies, in turn, that traditional measures of price elasticity will underproject consumers' responsiveness to policy interventions.

Suggested Citation

  • Scott, K. Rebecca, 2012. "Rational habits in gasoline demand," Energy Economics, Elsevier, vol. 34(5), pages 1713-1723.
  • Handle: RePEc:eee:eneeco:v:34:y:2012:i:5:p:1713-1723
    DOI: 10.1016/j.eneco.2012.02.007
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. John Coglianese & Lucas W. Davis & Lutz Kilian & James H. Stock, 2017. "Anticipation, Tax Avoidance, and the Price Elasticity of Gasoline Demand," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 32(1), pages 1-15, January.
    2. Marius Ley, Tobias Stucki, and Martin Woerter, 2016. "The Impact of Energy Prices on Green Innovation," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    3. Shanjun Li & Joshua Linn & Erich Muehlegger, 2014. "Gasoline Taxes and Consumer Behavior," American Economic Journal: Economic Policy, American Economic Association, vol. 6(4), pages 302-342, November.
    4. repec:eee:eneeco:v:64:y:2017:i:c:p:1-12 is not listed on IDEAS
    5. repec:eee:transa:v:106:y:2017:i:c:p:22-50 is not listed on IDEAS
    6. John Muellbauer, 2013. "Conditional eurobonds and the eurozone sovereign debt crisis," Oxford Review of Economic Policy, Oxford University Press, vol. 29(3), pages 610-645, AUTUMN.
    7. Baranzini, Andrea & Weber, Sylvain, 2013. "Elasticities of gasoline demand in Switzerland," Energy Policy, Elsevier, vol. 63(C), pages 674-680.
    8. Massimo Filippini & Bettina Hirl & Giuliano Masiero, 2015. "Rational habits in residential electricity demand," IdEP Economic Papers 1506, USI Università della Svizzera italiana.
    9. Rebecca K Scott, 2014. "Tax Salience vs. Price Uncertainty: Disentangling the Effects of Attention and Rational Habits," Economics Series Working Papers 736, University of Oxford, Department of Economics.
    10. Scott, K. Rebecca, 2015. "Demand and price uncertainty: Rational habits in international gasoline demand," Energy, Elsevier, vol. 79(C), pages 40-49.

    More about this item

    Keywords

    Gasoline demand; Rational habits; Price elasticity;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q50 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - General
    • R40 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - General

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