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Is Vehicle Depreciation a Component of Marginal Travel Cost? A Literature Review and Empirical Analysis

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  • Derrick Hang
  • Daniel McFadden
  • Kenneth Train
  • Ken Wise

Abstract

A review of 116 travel cost models finds that, of the studies that report their practice, about half include depreciation in their calculation of vehicle costs and half do not, with none giving a justification for either approach. We examine empirically whether depreciation is related to households' decisions of how much to drive. Using a sample of over 200,000 US households, we find that, relative to fuel costs, depreciation has a small effect on the amount that households drive. This finding is consistent with households' considering depreciation as primarily a fixed rather than marginal cost.

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  • Derrick Hang & Daniel McFadden & Kenneth Train & Ken Wise, 2016. "Is Vehicle Depreciation a Component of Marginal Travel Cost? A Literature Review and Empirical Analysis," Journal of Transport Economics and Policy, University of Bath, vol. 50(2), pages 132-13-150.
    • Handle: RePEc:tpe:jtecpo:2016:50:2:132--150
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    File URL: https://www.jstor.org/stable/jtranseconpoli.50.2.0132
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