January 13, 2012


Consumer Response to Stricter Fuel Economy Standards


Jinwon Kim, Alicia LLoro, and Phillip Li, Department of Economics, UC Irvine

The impacts of recent changes in Federal light-vehicle fuel economy standards depend crucially on consumers’ response to new vehicles with higher fuel economy and higher prices. Previous studies have primarily relied on stated preference experiments since there was little independent variation in vehicle price, fuel economy, and performance. The recent introduction of hybrid-electric vehicles has provided some independent variation in these key vehicle attributes, so we use data from the 2009 NHTS data to estimate willingness to pay for light vehicle fuel economy. We also estimate the “rebound effect” of purchasing more fuel efficient vehicles. Finally we will comment on the impact of measurement errors and partial observablility on previous studies.

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