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The Cost Of Inaccurate Consumer Information: The Case Of The Epa Mileage Figures

  • Roe, Terry L.
  • Sexauer, Benjamin
  • Kinsey, Jean D.

In this study a utility maximizing model is developed which accommodates changing states of information. Rational consumer choices in one state of information can lead to realizing different levels of utility than anticipated. Differences between these levels of utility suggest a measure for the value of information. This framework is applied to estimating the potential cost of possible inaccuracies in the EPA fuel-economy ratings. Survey data collected from new car buyers then are used to infer the magnitude of the actual costs that may be caused by the present EPA information.

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File URL: http://purl.umn.edu/13511
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Paper provided by University of Minnesota, Department of Applied Economics in its series Staff Papers with number 13511.

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Date of creation: 1981
Date of revision:
Handle: RePEc:ags:umaesp:13511
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  1. Chipman, John S & Moore, James C, 1980. "Compensating Variation, Consumer's Surplus, and Welfare," American Economic Review, American Economic Association, vol. 70(5), pages 933-49, December.
  2. Peltzman, Sam, 1973. "An Evaluation of Consumer Protection Legislation: The 1962 Drug Amendments," Journal of Political Economy, University of Chicago Press, vol. 81(5), pages 1049-91, Sept.-Oct.
  3. Sexauer, Benjamin, 1976. "A Monthly Analysis Of Consumer Demand In The United States," Staff Papers 13419, University of Minnesota, Department of Applied Economics.
  4. Claude S. Colantoni & Otto A. Davis & Malati Swaminuthan, 1976. "Imperfect Consumers and Welfare Comparisons of Policies Concerning Information and Regulation," Bell Journal of Economics, The RAND Corporation, vol. 7(2), pages 602-615, Autumn.
  5. Auld, Douglas A L, 1972. "Imperfect Knowledge and the New Theory of Demand," Journal of Political Economy, University of Chicago Press, vol. 80(6), pages 1287-94, Nov.-Dec..
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