Are Consumers Myopic? Evidence from New and Used Car Purchases
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Knittel_Are consumers.pdf
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Author(s)
Busse, Meghan R
Zettelmeyer, Florian
Knittel, Christopher Roland
Date Issued
February 2013
Journal
American Economic Review
Publisher
American Economic Association
Citation
Busse, Meghan R, Christopher R Knittel, and Florian Zettelmeyer. “Are Consumers Myopic? Evidence from New and Used Car Purchases.” American Economic Review 103, no. 1 (February 2013): 220–256. © 2013 by the American Economic Association.
Version
Final published version
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.
MIT Department
Sloan School of Management
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Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use.
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DOI of Published Version
https://doi.org/10.1257/aer.103.1.220
