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What do consumers believe about future gasoline prices?

Author

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  • Anderson, Soren T.
  • Kellogg, Ryan
  • Sallee, James M.

Abstract

A full understanding of how gasoline prices affect consumer behavior frequently requires information on how consumers forecast future gasoline prices. We provide the first evidence on the nature of these forecasts by analyzing two decades of data on gasoline price expectations from the Michigan Survey of Consumers. We find that average consumer beliefs are typically indistinguishable from a no-change forecast, justifying an assumption commonly made in the literature on consumer valuation of energy efficiency. We also provide evidence on circumstances in which consumer forecasts are likely to deviate from no-change and on significant cross-consumer forecast heterogeneity.

Suggested Citation

  • Anderson, Soren T. & Kellogg, Ryan & Sallee, James M., 2013. "What do consumers believe about future gasoline prices?," Journal of Environmental Economics and Management, Elsevier, vol. 66(3), pages 383-403.
  • Handle: RePEc:eee:jeeman:v:66:y:2013:i:3:p:383-403
    DOI: 10.1016/j.jeem.2013.07.002
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    References listed on IDEAS

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    More about this item

    Keywords

    Gasoline prices; Consumer beliefs; Automobile demand; Energy efficiency;

    JEL classification:

    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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