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What Do Consumers Believe About Future Gasoline Prices?

  • Soren T. Anderson
  • Ryan Kellogg
  • James M. Sallee

A full understanding of how gasoline prices affect consumer behavior frequently requires information on how consumers forecast future gasoline prices. We provide the first evidence on the nature of these forecasts by analyzing two decades of data on gasoline price expectations from the Michigan Survey of Consumers. We find that average consumer beliefs are typically indistinguishable from a no-change forecast, justifying an assumption commonly made in the literature on consumer valuation of energy efficiency. We also provide evidence on circumstances in which consumer forecasts are likely to deviate from no-change and on significant cross-consumer forecast heterogeneity.

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File URL: http://www.nber.org/papers/w16974.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16974.

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Date of creation: Apr 2011
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Publication status: published as Anderson, Soren T. & Kellogg, Ryan & Sallee, James M., 2013. "What do consumers believe about future gasoline prices?," Journal of Environmental Economics and Management, Elsevier, vol. 66(3), pages 383-403.
Handle: RePEc:nbr:nberwo:16974
Note: EEE IO PE
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