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High Frequency Evidence on the Demand for Gasoline

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  • Laurence Levin
  • Matthew S. Lewis
  • Frank A. Wolak

Abstract

Daily city-level expenditures and prices are used to estimate the price responsiveness of gasoline demand in the U.S. Using a frequency of purchase model that explicitly acknowledges the distinction between gasoline demand and gasoline expenditures, we consistently find the price elasticity of demand to be an order of magnitude larger than estimates from recent studies using more aggregated data. We demonstrate directly that higher levels of spatial and temporal aggregation generate increasingly inelastic demand estimates, and then perform a decomposition to examine the relative importance of several different sources of bias likely to arise in more aggregated studies.

Suggested Citation

  • Laurence Levin & Matthew S. Lewis & Frank A. Wolak, 2016. "High Frequency Evidence on the Demand for Gasoline," NBER Working Papers 22345, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:22345
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    References listed on IDEAS

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    1. John Coglianese & Lucas W. Davis & Lutz Kilian & James H. Stock, 2017. "Anticipation, Tax Avoidance, and the Price Elasticity of Gasoline Demand," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 32(1), pages 1-15, January.
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    Cited by:

    1. Ivan Tilov & Sylvain Weber, 2020. "Heterogeneity in price elasticity of vehicle kilometers traveled: Evidence from micro-level panel data," IRENE Working Papers 20-12, IRENE Institute of Economic Research.
    2. Michael Bates & Seolah Kim, 2019. "Per-Cluster Instrumental Variables Estimation: Uncovering the Price Elasticity of the Demand for Gasoline," Working Papers 202021, University of California at Riverside, Department of Economics, revised Jul 2020.
    3. Gillingham, Kenneth & Munk-Nielsen, Anders, 2019. "A tale of two tails: Commuting and the fuel price response in driving," Journal of Urban Economics, Elsevier, vol. 109(C), pages 27-40.
    4. Donna, Javier D., 2018. "Measuring Long-Run Price Elasticities in Urban Travel Demand," MPRA Paper 90260, University Library of Munich, Germany.
    5. Goetzke, Frank & Vance, Colin, 2021. "An increasing gasoline price elasticity in the United States?," Energy Economics, Elsevier, vol. 95(C).
    6. Davis, Lucas W., 2021. "Estimating the price elasticity of demand for subways: Evidence from Mexico," Regional Science and Urban Economics, Elsevier, vol. 87(C).
    7. Kellogg, Ryan, 2018. "Gasoline price uncertainty and the design of fuel economy standards," Journal of Public Economics, Elsevier, vol. 160(C), pages 14-32.
    8. Jansen, David-Jan & Jonker, Nicole, 2018. "Fuel tourism in Dutch border regions: Are only salient price differentials relevant?," Energy Economics, Elsevier, vol. 74(C), pages 143-153.
    9. Goetzke, Frank & Vance, Colin, 2018. "Is gasoline price elasticity in the United States increasing? Evidence from the 2009 and 2017 national household travel surveys," Ruhr Economic Papers 765, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    10. Ren'e Aid & Luciano Campi & Liangchen Li & Mike Ludkovski, 2020. "An Impulse-Regime Switching Game Model of Vertical Competition," Papers 2006.04382, arXiv.org.
    11. SERSE Valerio,, 2019. "Do sugar taxes affect the right consumers ?," LIDAM Discussion Papers CORE 2019017, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    12. Sebastian Gechert & Katja Rietzler & Sven Schreiber & Ulrike Stein, 2019. "Wirtschaftliche Instrumente für eine klima- und sozialverträgliche CO2-Bepreisung," IMK Studies 65-2019, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    13. Rivers, Nicholas & Schaufele, Brandon, 2017. "Gasoline price and new vehicle fuel efficiency: Evidence from Canada," Energy Economics, Elsevier, vol. 68(C), pages 454-465.
    14. Nguyen-Ones , Mai & Steen, Frode, 2018. "Market Power in Retail Gasoline Markets," Discussion Paper Series in Economics 21/2019, Norwegian School of Economics, Department of Economics, revised 01 Jul 2019.
    15. Tveito, Andreas, 2019. "Coordination and price leadership in an unregulated environment," Working Papers in Economics 4/19, University of Bergen, Department of Economics.
    16. Deltas, George & Polemis, Michael, 2020. "Estimating retail gasoline price dynamics: The effects of sample characteristics and research design," Energy Economics, Elsevier, vol. 92(C).
    17. Nishida, Mitsukuni & Remer, Marc, 2018. "Lowering consumer search costs can lead to higher prices," Economics Letters, Elsevier, vol. 162(C), pages 1-4.
    18. Ghoddusi, Hamed & Morovati, Mohammad & Rafizadeh, Nima, 2019. "Foreign Exchange Shocks and Gasoline Consumption," Energy Economics, Elsevier, vol. 84(C).
    19. Rahmati, Mohammad Hossein & Tavakoli, Amirhossein & Vesal, Mohammad, 2019. "What do one hundred million transactions tell us about demand elasticity of gasoline?," MPRA Paper 97858, University Library of Munich, Germany.
    20. Afkhami, Mohamad & Ghoddusi, Hamed & Rafizadeh, Nima, 2021. "Google Search Explains Your Gasoline Consumption!," Energy Economics, Elsevier, vol. 99(C).
    21. David P. Byrne & Nicolas de Roos, 2019. "Learning to Coordinate: A Study in Retail Gasoline," American Economic Review, American Economic Association, vol. 109(2), pages 591-619, February.
    22. Michael Gelman & Yuriy Gorodnichenko & Shachar Kariv & Dmitri Koustas & Matthew D. Shapiro & Dan Silverman & Steven Tadelis, 2016. "The Response of Consumer Spending to Changes in Gasoline Prices," NBER Working Papers 22969, National Bureau of Economic Research, Inc.

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    • L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General

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