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Demand and price uncertainty: Rational habits in international gasoline demand

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  • Scott, K. Rebecca

Abstract

Given a rational agent, demand for a habit-forming good is sensitive to uncertainty in future prices. In particular, price uncertainty reduces both the level and the price responsiveness of demand. These two effects, which may bear heavily on the efficacy of policies to discourage consumption of harmful addictive goods, can be tested by augmenting a simple demand model with a measure of price uncertainty.

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  • Scott, K. Rebecca, 2015. "Demand and price uncertainty: Rational habits in international gasoline demand," Energy, Elsevier, vol. 79(C), pages 40-49.
  • Handle: RePEc:eee:energy:v:79:y:2015:i:c:p:40-49
    DOI: 10.1016/j.energy.2014.09.066
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    3. Schaufele, Brandon, 2019. "Demand Shocks Change the Excess Burden From Carbon Taxes," MPRA Paper 92132, University Library of Munich, Germany.
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    6. Chang, Kai & Zhang, Chao, 2018. "Asymmetric dependence structure between emissions allowances and wholesale diesel/gasoline prices in emerging China's emissions trading scheme pilots," Energy, Elsevier, vol. 164(C), pages 124-136.
    7. van den Bijgaart, Inge, 2016. "Essays in environmental economics and policy," Other publications TiSEM 298bee2a-cb08-4173-9fe1-8, Tilburg University, School of Economics and Management.
    8. van den Bijgaart, I.M., 2017. "Too slow a change? Deep habits, consumption shifts and transitory tax," Working Papers in Economics 701, University of Gothenburg, Department of Economics.
    9. Filippini, Massimo & Hirl, Bettina & Masiero, Giuliano, 2018. "Habits and rational behaviour in residential electricity demand," Resource and Energy Economics, Elsevier, vol. 52(C), pages 137-152.

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