An analysis of vehicle-buying attitudes of US consumers

We examine how vehicle-buying attitudes of US consumers (VBA) respond to changes in their assessments of current and future economic conditions (CC and FC) and changes in real retail gasoline prices (GP). Our findings first indicate that VBA responds symmetrically to GP; when GP increases (decreases), then VBA deteriorates (improves). Second, VBA responds asymmetrically to changes in CC. VBA deteriorates in response to deteriorations in CC. However, when CC improves, VBA remains unchanged. This asymmetry is consistent with the psychological negativity bias whereby people tend to assign more (less) weight to negative (positive) events. Third, VBA responds asymmetrically to changes in FC. VBA improves in response to improvements in FC. However, when FC deteriorates, VBA remains unchanged. This asymmetry is consistent with the psychological optimism bias whereby people tend to overestimate (underestimate) the likelihood of positive (negative) future outcomes. We conclude by providing an explanation for our findings, including a brief policy discussion.