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Consumers' response to price increases: Evidence from gasoline markets

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  • Tsanko, Ilona

Abstract

Understanding how consumers respond to price increases is key when designing price-related policies. Using microdata on vehicle usage and paid fuel prices, I analyze consumers' response, focusing on three channels of mitigation: distance driven, fuel efficiency, and search. On average, consumers mitigate 38 percent of a price increase through these channels. Reducing distance driven is the primary channel of mitigation. Increased search efforts mitigate up to 11 percent of a price increase. Response levels vary significantly with newer vehicles' owners mitigating up to 88 percent of a price increase, while older vehicle owners achieve can mitigate up to 45 percent.

Suggested Citation

  • Tsanko, Ilona, 2024. "Consumers' response to price increases: Evidence from gasoline markets," ZEW Discussion Papers 24-020, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:289454
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    References listed on IDEAS

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    More about this item

    Keywords

    Demand response; Gasoline prices; Consumers search; Fuel consumption;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • L91 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Transportation: General
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy

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