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Household demand and willingness to pay for hybrid vehicles

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  • Liu, Yizao

Abstract

This paper quantitatively evaluates consumers' willingness to pay for hybrid vehicles by estimating the demand of hybrid vehicles in the U.S. market. Using micro-level data on consumer purchases of hybrid and non-hybrid vehicles from National Household Travel Survey 2009, this paper formulates a mixed logit model of consumers' vehicle choices. Parameter estimates are then used to evaluate consumers' willingness to pay for hybrids. Results suggest that households' willingness to pay for hybrids ranges from $963 to $1718 for different income groups, which is significantly lower than the average price premium (over $5000) of hybrid vehicles, even when taking the fuel costs savings of hybrid vehicles into consideration. The differences reveal that although the market has shown increasing interest in hybrid vehicles, consumers' valuation of the hybrid feature is still not high enough to compensate for the price premium when they make new purchases. Policy simulations are conducted to examine the effects of raising federal tax incentives on the purchase of hybrid vehicles.

Suggested Citation

  • Liu, Yizao, 2014. "Household demand and willingness to pay for hybrid vehicles," Energy Economics, Elsevier, vol. 44(C), pages 191-197.
    • Handle: RePEc:eee:eneeco:v:44:y:2014:i:c:p:191-197
    DOI: 10.1016/j.eneco.2014.03.027
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    Cited by:

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    2. Iankov, Ivan & Taylor, Michael A.P. & Scrafton, Derek, 2017. "Forecasting greenhouse gas emissions performance of the future Australian light vehicle traffic fleet," Transportation Research Part A: Policy and Practice, Elsevier, vol. 99(C), pages 125-146.
    3. Jinshi Cheng & Jiali Wang & Bengang Gong, 2020. "Game-Theoretic Analysis of Price and Quantity Decisions for Electric Vehicle Supply Chain Under Subsidy Reduction," Computational Economics, Springer;Society for Computational Economics, vol. 55(4), pages 1185-1208, April.
    4. Lesly Cassin & Paolo Melindi-Ghidi & Fabien Prieur, 2021. "The impact of income inequality on public environmental expenditure with green consumerism," Working Papers 2021.08, FAERE - French Association of Environmental and Resource Economists.
    5. Arik Levinson, 2019. "Energy Efficiency Standards Are More Regressive Than Energy Taxes: Theory and Evidence," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 6(S1), pages 7-36.
    6. Kim, Junghun & Seung, Hyunchan & Lee, Jongsu & Ahn, Joongha, 2020. "Asymmetric preference and loss aversion for electric vehicles: The reference-dependent choice model capturing different preference directions," Energy Economics, Elsevier, vol. 86(C).
    7. Lesly Cassin & Paolo Melindi-Ghidi & Fabien Prieur, 2021. "Voting for environmental policy with green consumers: the impact of income inequality," CEE-M Working Papers hal-03146526, CEE-M, Universtiy of Montpellier, CNRS, INRA, Montpellier SupAgro.
    8. Hackbarth, André & Madlener, Reinhard, 2018. "Combined Vehicle Type and Fuel Type Choices of Private Households: An Empirical Analysis for Germany," FCN Working Papers 17/2018, E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN), revised May 2019.
    9. Hasan-Basri, Bakti & Mohd Mustafa, Muzafarshah & Bakar, Normizan, 2019. "Are Malaysian Consumers Willing to Pay for Hybrid Cars’ Attributes?," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 53(1), pages 121-134.
    10. Martha A. Starr, 2015. "The Economics of Ethical Consumption," Working Papers 2015-01, American University, Department of Economics.
    11. Yizao Liu, 2018. "The effects of competitors on new product launch and market expansion in the hybrid car market," Empirical Economics, Springer, vol. 55(4), pages 1849-1868, December.
    12. Rahmani, Djamel & Loureiro, Maria L., 2019. "Assessing drivers’ preferences for hybrid electric vehicles (HEV) in Spain," Research in Transportation Economics, Elsevier, vol. 73(C), pages 89-97.
    13. Jiaxing Wang & Shigeru Matsumoto, 2019. "Can subsidy programs change the customer base of next-generation vehicles?," RIEEM Discussion Paper Series 1904, Research Institute for Environmental Economics and Management, Waseda University.
    14. Choi, Young-Young & Liu, Yizao & Huang, Ling, 2015. "Safer or Cheaper? Household Safety Concerns, Vehicle Choices, and the Costs of Fuel Economy Standards," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205797, Agricultural and Applied Economics Association.
    15. Bigerna, S. & Bollino, C.A. & Micheli, S. & Polinori, P., 2017. "Revealed and stated preferences for CO2 emissions reduction: The missing link," Renewable and Sustainable Energy Reviews, Elsevier, vol. 68(P2), pages 1213-1221.

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    More about this item

    Keywords

    Willingness to pay; Fuel economy; Hybrid vehicles; Tax incentives;
    All these keywords.

    JEL classification:

    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
    • R40 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - General
    • R41 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise

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