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The Cost Of Inaccurate Automobile Mileage Information

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

The model in this paper integrates the possibility of misinformation into consumer utility theory. If the utility realized from a good differs from the utility anticipated at time of purchase, shifts in demand would occur, and thus changes in consumer surplus. These changes provide a measure of the cost of misinformation or value of improved information. The empirical analysis yields estimates of the private and social cost of inaccuracies in automobile buyers; pre-purchase mileage estimates. If automobile purchases are based on imperfect gasoline mileage information, a discrepancy results between expected and actual fuel-efficiency. The data source is a survey of 1980 model car buyers conducted by the authors.

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File URL: http://purl.umn.edu/14056
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Paper provided by University of Minnesota, Department of Applied Economics in its series Staff Papers with number 14056.

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Date of creation: 1981
Date of revision:
Handle: RePEc:ags:umaesp:14056
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  1. 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.
  2. Sexauer, Benjamin, 1976. "A Monthly Analysis Of Consumer Demand In The United States," Staff Papers 13419, University of Minnesota, Department of Applied Economics.
  3. 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.
  4. 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.
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