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Estimating Consumer Substitution between New and Used Passenger Vehicles

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  • Benjamin Leard

Abstract

Recent literature has shown the importance of modeling consumer demand for assessing the effects of new passenger vehicle fuel economy and greenhouse gas emissions standards. A relevant feature of demand for making this assessment is how vehicle buyers substitute between new vehicles and other options, such as a used vehicle. In this paper, I estimate this substitution using market-level and second choice data. I estimate a long-run market-price elasticity of demand for new vehicles equal to −0.34. I then explore the implications of this elasticity for assessing the welfare effects of 2021–26 SAFE Vehicles Rule. The simulation results show that applying the estimated elasticity significantly reduces the net benefits of the rule.

Suggested Citation

  • Benjamin Leard, 2022. "Estimating Consumer Substitution between New and Used Passenger Vehicles," Journal of the Association of Environmental and Resource Economists, University of Chicago Press, vol. 9(1), pages 27-49.
    • Handle: RePEc:ucp:jaerec:doi:10.1086/715814
    DOI: 10.1086/715814
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    Cited by:

    1. Pessoa, Joao Paulo & Santos, Roberto Amaral & Chimeli, Ariaster, 2023. "Natural Gas Vehicles: Consequences to Fuel Markets and the Environment," SocArXiv 7tvgy, Center for Open Science.
    2. Zhou, Fan & Yang, Ziying & Wu, Di & Zheng, Zuduo, 2024. "Shifting towards luxury cars: The price and environmental effects of Beijing’s vehicle lottery system and an alternative policy," Transportation Research Part A: Policy and Practice, Elsevier, vol. 181(C).
    3. Leard, Benjamin & Wu, Yidi, 2023. "New Passenger Vehicle Demand Elasticities: Estimates and Policy Implications," RFF Working Paper Series 23-33, Resources for the Future.
    4. Roberto Amaral-Santos & Ariaster Chimeli & Joao Paulo Pessoa, 2023. "Natural Gas Vehicles: Consequences to Fuel Markets and the Environment," Working Papers, Department of Economics 2023_07, University of São Paulo (FEA-USP).
    5. Leard, Benjamin & Linn, Joshua & Springel, Katalin, 2023. "Vehicle Attribute Tradeoffs and the Distributional Effects of US Fuel Economy and Greenhouse Gas Emissions Standards," RFF Working Paper Series 23-04, Resources for the Future.

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