What do consumers believe about future gasoline prices?

Anderson, Soren T.; Kellogg, Ryan; Sallee, James M.

doi:10.1016/j.jeem.2013.07.002

Cited by 169 publications

(102 citation statements)

References 28 publications

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“…It is also possible that consumer preferences depend on expectations of future prices. Anderson et al (2013) present evidence that consumer beliefs about future energy prices are determined by current prices, indicating that this case would be captured by the specifications based on contemporaneous prices.…”

Section: Methodsmentioning

confidence: 79%

Do energy prices influence investment in energy efficiency? Evidence from energy star appliances

Jacobsen

2015

Journal of Environmental Economics and Management

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Section: Methodsmentioning

confidence: 79%

Do energy prices influence investment in energy efficiency? Evidence from energy star appliances

Jacobsen

2015

Journal of Environmental Economics and Management

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“…To test for rational expectations of g, one would want to repeat the VOAS many times over a sufficient number of years or decades in order to average over idiosyncratic oil price shocks. Allcott (2011) and Anderson, Kellogg, and Sallee (2011) test whether consumers' expectations of future gas prices are consistent with current prices and oil futures, but this is conceptually distinct from the misperception studied here.…”

Section: A Valuation Ratiosmentioning

confidence: 87%

The Welfare Effects of Misperceived Product Costs: Data and Calibrations from the Automobile Market

Allcott

2013

American Economic Journal: Economic Policy

110

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This analysis exploits new data from the Vehicle Ownership and Alternatives Survey, which elicits beliefs over the financial benefits of owning higher fuel economy vehicles. The data are used to test for underestimation and to document evidence of "MPG Illusion": consumers think as if fuel costs scale linearly in miles per gallon instead of gallons per mile. Counterfactuals suggest that the MPG Illusion reduces welfare by less than $4 per new vehicle. Furthermore, even the most severe plausible underestimation of the financial benefits of fuel economy cannot account for the consumer welfare gains attributed to fuel economy standards. (JEL D12, D83, L62)C onsumers' choices depend both on preferences over outcomes and on beliefs about how choices map into these outcomes. Typical demand models assume that consumers have unbiased beliefs about how a product attribute maps into utility, implying that aggregate choice patterns map directly into underlying preferences. However, there is empirical evidence from different contexts that beliefs are sometimes systematically biased. For example, Starbucks customers tend to overestimate the calories in drinks and underestimate the calories in food (Bollinger, Leslie, and Sorensen 2011). People signing up for gyms are overconfident about their future attendance and about their likelihood of cancelling automatically renewed memberships (DellaVigna and Malmendier 2006). More than 70 percent of seniors choosing between Medicare plans underestimate potential cost savings from switching (Kling et al. 2012).This paper focuses on the choice of automobiles, one of the most expensive and complicated decisions that consumers make. In particular, I focus on consumers' beliefs about the differences in fuel costs between vehicles with different fuel economy ratings. This is motivated by recent work documenting that consumers are

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“…Anderson et al (2013) find that consumers use a "no-change" to forecast gasoline prices, so we would expect identical responsiveness to both taxes and market prices 12 . Nonetheless, it is possible that BC residents made errors with respect to their expectation of carbon tax increases-namely, they may have behaved as though the tax was initially set at its maximum $30/tCO 2 e level.…”

Section: Robustness Checksmentioning

confidence: 94%