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Consumer Learning and Hybrid Vehicle Adoption

  • Heutel, Garth

    (University of North Carolina, Greensboro)

  • Muehlegger, Erich

    (Harvard University)

We study the diffusion of hybrid vehicles among consumers. Using data on sales of 11 different models over seven years, we identify the effect of the penetration rate--total cumulative hybrid sales per capita--on new hybrid purchases. The penetration rate significantly affects new purchases, and the effect differs by hybrid model. In particular, we find a positive diffusion effect from the Toyota Prius and a negative diffusion effect from the Honda Insight, with elasticities of 0.23 to 0.85 for the Prius and -0.08 to -0.32 for the Insight. This finding is consistent with our model of model-specific learning along with anecdotal evidence that early Insight models were perceived to be of lower quality than Prius models. Higher Insight penetration rates gave a negative signal about hybrid quality and inhibited rather than promoted hybrid adoption. The findings are relevant for policy designed to promote new technologies.

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Paper provided by Harvard University, John F. Kennedy School of Government in its series Working Paper Series with number rwp10-013.

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Date of creation: Apr 2010
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Handle: RePEc:ecl:harjfk:rwp10-013
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  1. Jensen, Richard, 1983. "Innovation adoption and diffusion when there are competing innovations," Journal of Economic Theory, Elsevier, vol. 29(1), pages 161-171, February.
  2. de Haan, Peter & Mueller, Michel G. & Peters, Anja, 2006. "Does the hybrid Toyota Prius lead to rebound effects? Analysis of size and number of cars previously owned by Swiss Prius buyers," Ecological Economics, Elsevier, vol. 58(3), pages 592-605, June.
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  15. Kahn, Matthew E., 2007. "Do greens drive Hummers or hybrids? Environmental ideology as a determinant of consumer choice," Journal of Environmental Economics and Management, Elsevier, vol. 54(2), pages 129-145, September.
  16. H. Peyton Young, 2009. "Innovation Diffusion in Heterogeneous Populations: Contagion, Social Influence, and Social Learning," American Economic Review, American Economic Association, vol. 99(5), pages 1899-1924, December.
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