Most Consumers Don’t Buy Hybrids: Is Rational Choice a Sufficient Explanation?
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Published:2018-12-19
Issue:1
Volume:10
Page:1-38
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ISSN:2194-5888
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Container-title:Journal of Benefit-Cost Analysis
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language:en
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Short-container-title:J. Benefit Cost Anal.
Author:
Duncan Denvil,Ku Arthur Lin,Julian Alyssa,Carley Sanya,Siddiki Saba,Zirogiannis Nikolaos,Graham John D.
Abstract
Although federal regulation of vehicle fuel economy is often seen as environmental policy, over 70% of the estimated benefits of the 2017–2025 federal standards are savings in consumer expenditures on gasoline. Rational-choice economists question the counting of these benefits since studies show that the fuel efficiency of a car is reflected in its price at sale and resale. We contribute to this debate by exploring why most consumers in the United States do not purchase a proven fuel-saving innovation: the hybrid-electric vehicle (HEV). A database of 110 vehicle pairs is assembled where a consumer can choose a hybrid or gasoline version of virtually the same vehicle. Few choose the HEV. A total cost of ownership model is used to estimate payback periods for the price premiums associated with the HEV choice. In a majority of cases, a rational-choice explanation is sufficient to understand consumer disinterest in the HEV. However, in a significant minority of cases, a rational-choice explanation is not readily apparent, even when non-pecuniary attributes (e.g., performance and cargo space) are considered. Future research should examine, from a behavioral economics perspective, why consumers do not choose HEVs when pricing and payback periods appear to be favorable.
Publisher
Cambridge University Press (CUP)
Subject
Public Administration,Economics and Econometrics,Sociology and Political Science
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