Automakers' short-run responses to changing gasoline prices

Ashley A Langer, Nathan H. Miller

Research output: Contribution to journalArticle

17 Citations (Scopus)

Abstract

We provide empirical evidence that automobile manufacturers use cash incentives to offset how gasoline price fluctuations affect the expected fuel expenses of automobile buyers. Regressions based on a database of incentives over 2003 to 2006 suggest that on average, manufacturers offset 40% of the change in relative fuel costs between vehicles due to gasoline price fluctuations. The results highlight that carbon taxes and emissions trading programs likelywould generate substantial substitution within vehicle classes, and studies that ignore manufacturer discounting likely underestimate consumer demand for fuel economy. The results also have implications for the optimal design of feebate programs.

Original languageEnglish (US)
Pages (from-to)1198-1211
Number of pages14
JournalReview of Economics and Statistics
Volume95
Issue number4
DOIs
StatePublished - 2013

Fingerprint

fluctuation
motor vehicle
incentive
emissions trading
substitution
taxes
regression
economy
demand
costs
evidence
Gasoline prices
Short-run
Automobile
Fluctuations
Incentives
Substitution
Costs
Cash
Discounting

ASJC Scopus subject areas

  • Economics and Econometrics
  • Social Sciences (miscellaneous)

Cite this

Automakers' short-run responses to changing gasoline prices. / Langer, Ashley A; Miller, Nathan H.

In: Review of Economics and Statistics, Vol. 95, No. 4, 2013, p. 1198-1211.

Research output: Contribution to journalArticle

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