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Busse, Meghan R.,
Christopher R. Knittel, and
Florian Zettelmeyer. 2013. "Are Consumers Myopic? Evidence from New and Used Car Purchases."
,
103(1): 220-56.
Show Article Details
DOI: 10.1257/aer.103.1.220
Abstract: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)
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Authors:
Busse, Meghan R. (Northwestern U)
Knittel, Christopher R. (MIT)
Zettelmeyer, Florian (Northwestern U)
JEL Classifications:
D12: Consumer Economics: Empirical Analysis
H25: Business Taxes and Subsidies including sales and value-added (VAT)
L11: Production, Pricing, and Market Structure; Size Distribution of Firms
L62: Automobiles; Other Transportation Equipment
L71: Mining, Extraction, and Refining: Hydrocarbon Fuels
L81: Retail and Wholesale Trade; e-Commerce
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