Are Consumers Myopic? Evidence from New and Used Car Purchases

By Meghan R. Busse, Christopher R. Knittel, Florian Zettelmeyer. 2013

477 citations recorded by the source corpus.

We investigate whether car buyers are myopic about future fuel costs. We estimate the effect of gasoline prices on short-run equilibrium prices of cars of different fuel economies. We then compare the implied changes in willingness-to-pay to the associated changes in expected future gasoline costs for cars of different fuel economies in order to calculate implicit discount rates. Using different assumptions about annual mileage, survival rates, and demand elasticities, we calculate a range of implicit discount rates similar to the range of interest rates paid by car buyers who borrow. We interpret this as showing little evidence of consumer myopia. (JEL D12, H25, L11, L62, L71, L81)

Subfields: Economics and Econometrics, Renewable Energy, Sustainability and the Environment

View Paper: https://www.semanticscholar.org/paper/abb3fdc9258c1d8f1d03f00798d0e970a0a9f49f

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

In Renewable Energy, Sustainability and the Environment

Citations in the corpus

How might potential future plug-in electric vehicle buyers differ from current “Pioneer” owners? (2016, result): “Overall, our sample of Mainstream vehicle buyers seems to be largely representative of new vehicle-buying households, in that respondents tend to have higher income and education levels than the general population, as also found in previous studies (Axsen and Kurani, 2010; Busse et al., 2013; Harris”
Internal and external barriers to energy efficiency: which role for policy interventions? (2019, background): “6 For this reason, the papers that find evidence of rational inattention, provide also evidence of myopia (Busse et al. 2013; Allcott andWozny 2014). asymmetric information combined with opposing interests (also called split incentives) between a principal (for example, the landlord, who is…”
Making the implicit explicit: A look inside the implicit discount rate (2016, background): “Second, individuals may follow social norms for pro environmental behavior, thus avoiding social disapproval (Cialdini, 2007; Goldstein et al., 2008).”
The Demand for Energy-Using Assets among the World's Rising Middle Classes (2016, background): “2 See, for example, recent contributions on heating systems by Davis and Kilian (2011) and automobiles by Busse, Knittel, and Zettelmeyer (2013).”
Is awareness of public charging associated with consumer interest in plug-in electric vehicles? (2015, background): “Though, we do demonstrate that our distinction between perceived public charger existence and abundance provides a unique perspective on the potential association with PEV interest relative to previous studies (Carley et al., 2013; Krause et al., 2013).”
Are consumers willing to pay to let cars drive for them? Analyzing response to autonomous vehicles (2017, background): “…that leverage variation in gasoline prices, however, suggest that consumers fully value or only slightly undervalue fuel cost savings in new vehicle markets and only moderately undervalue these savings in used vehicle markets (Allcott and Wozny, 2014; Busse et al., 2013; Sallee et al., 2016).”
Willingness-to-Pay for Alternative Fuel Vehicle Characteristics: A Stated Choice Study for Germany (2014, background): “Non-monetary governmental incentives are again only appreciated by mileage, or commensurate interest rates for credit-financed vehicle purchases (e.g. Helfand and Wolverton, 2011; Allcot and Wozny 2012; Busse et al., 2013; Allcott, 2013; Gillingham et al., 2014).”
Vehicle Scrappage and Gasoline Policy (2013, methodology): “…of measuring the effect on vehicle prices over a much wider range of ages.4 We employ the following specification for equilibrium price changes: 4 Busse et al (2013) observe the set of used cars sold at new car dealerships: This is the “high-end” of the used market, where vehicles have an…”