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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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    JEL classification:

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

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