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Gasoline Prices and the Used Automobile Market: A Rational Expectations Asset Price Approach

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  • James A. Kahn

Abstract

This paper examines the impact of changes in gasoline price expectations on the market values of used automobiles. An asset model of automobile valuation is used to relate year-to-year changes in market values to changes in the present discounted value of gasoline expenses. Econometric evidence from data covering the years 1972 through 1981 substantially confirms the hypothesis of the model that a gasoline price shock causes relative price changes across automobile types in proportion to the differences in their rates of fuel consumption.

Suggested Citation

  • James A. Kahn, 1986. "Gasoline Prices and the Used Automobile Market: A Rational Expectations Asset Price Approach," The Quarterly Journal of Economics, Oxford University Press, vol. 101(2), pages 323-339.
  • Handle: RePEc:oup:qjecon:v:101:y:1986:i:2:p:323-339.
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