Rising gasoline prices and federal automobile efficiency standards: their impact on consumer choice

Book · Thu Jan 01 04:00:00 EST 1981

OSTI ID:5535488

Atkinson, S

This paper models consumer choice of the privately optimal (PO) level of automobile efficiency in response to changes in expected real gasoline prices. A model of consumer choice is developed where the consumer maximizes the utility from automobile attributes, subject to a technology constraint relating efficiency to attributes and an automobile expenditure budget constraint. Calculation of the first-order conditions for utility maximization indicates that the optimizing consumer will equate the marginal utility of each attribute to its marginal costs for both capital and gasoline expenditures. Comparative statics analysis of these first-order conditions allows estimation of the change in the optimal attribute choice with respect to an instantaneous change in the current price of gasoline or a change in the expected growth rate in the real price of gasoline. The chief empirical result of the paper is obtained by deriving elasticities of the implied change in PO efficiency levels in response to these price changes. These elasticities indicate substantial price responsiveness, suggesting that consumers responding to price increases will achieve substantial increases in new-car fleet efficiencies without government-set mpg standards. 25 reference, 7 tables.

• OSTI ID: 5535488
• Country of Publication: United States
• Language: English

Related Subjects

02 PETROLEUM
020500 -- Petroleum-- Products & By-Products
020700* -- Petroleum-- Economics
Industrial
& Business Aspects
29 ENERGY PLANNING, POLICY, AND ECONOMY
290200 -- Energy Planning & Policy-- Economics & Sociology
AUTOMOBILES
ECONOMIC IMPACT
EFFICIENCY
ENERGY EFFICIENCY
ENERGY EXPENSES
FUELS
GASOLINE
LIQUID FUELS
PETROLEUM PRODUCTS
PRICES
RETAIL PRICES
STANDARDS
VEHICLES