Panel Paper:
How Much Do New Vehicle Consumers Value Fuel Economy and Performance? New Estimates and Implications for the Energy Efficiency Gap
*Names in bold indicate Presenter
Using a unique data set and novel statistical techniques to account for the endogeneity of vehicle attributes, we find that consumers undervalue fuel cost savings, paying about 50 cents for one dollar of discounted future fuel cost savings. The estimates are based on a unique data set that contains about 500,000 observations of new car buyers covering the years 2010 through 2014. The estimation strategy uses information on fuel-saving technologies to control for unobserved vehicle attributes that would otherwise bias the estimates.
The estimated willingness to pay for performance implies that the cost of raising fuel economy, including the opportunity cost, exceeds the value, suggesting that an energy efficiency gap for fuel economy does not exist. The results imply that fuel economy and greenhouse gas standards may reduce consumer welfare, as well as consumer demand for new vehicles.