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How Much Do Consumers Value Fuel Economy and Performance? Evidence from Technology Adoption

Author

Listed:
  • Benjamin Leard

    (University of Tennessee)

  • Joshua Linn

    (University of Maryland and Resources for the Future)

  • Yichen Christy Zhou

    (Clemson University)

Abstract

During historical periods in which U.S. fuel economy standards were unchanging, automakers increased performance but not fuel economy, contrasting with recent periods of tightening standards and rising fuel economy. This paper evaluates the welfare consequences of automakers forgoing performance increases to raise fuel economy as standards have tightened since 2012. Using a unique data set and a novel approach to account for fuel economy and performance endogeneity, we find undervaluation of fuel cost savings and high valuation of performance. Welfare costs of forgone performance approximately equal expected fuel savings benefits, suggesting approximately zero net private consumer benefit from tightened standards.

Suggested Citation

  • Benjamin Leard & Joshua Linn & Yichen Christy Zhou, 2023. "How Much Do Consumers Value Fuel Economy and Performance? Evidence from Technology Adoption," The Review of Economics and Statistics, MIT Press, vol. 105(1), pages 158-174, January.
    • Handle: RePEc:tpr:restat:v:105:y:2023:i:1:p:158-174
    DOI: 10.1162/rest_a_01045
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    Cited by:

    1. Leard, Benjamin & Wu, Yidi, 2023. "New Passenger Vehicle Demand Elasticities: Estimates and Policy Implications," RFF Working Paper Series 23-33, Resources for the Future.

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