The influence of gasoline prices and consideration sets on the fuel economy of new vehicle sales
Name
1263346730-MIT.pdf
Size
1.89 MB
Format
Adobe PDF
Checksum (MD5)
0dfd38c6799895fd15232fe1297a4cd1
Author(s)
Ruckdaschel, James David.
Advisor(s)
David R. Keith.
Date Issued
2020
Publisher
Massachusetts Institute of Technology
Abstract
Understanding the factors that influence consumer investment in fuel economy when purchasing a new vehicle is critical for stakeholders including environmental policy makers, automotive manufacturers and oil companies. The energy economics literature shows that consumers are relatively rational in how much fuel economy they purchase in response to changes in gas price. Yet the marketing literature suggests that consumers only consider a small number of vehicle makes/models - as few as 2-6 - when making their purchase decision. Given this, we consider the extent to which consumer's rational response to gas price changes is achieved by including different vehicles in their consideration set, versus choosing differently from within their consideration set. We analyze data from 210,885 responses to a new vehicle customer satisfaction survey collected over 9 years in which respondents state the vehicles they considered purchasing in addition to the vehicle they ultimately purchased. Our findings show that as gasoline prices rise, their purchased vehicle fuel economy increases more than their consideration set average fuel economy does, with both increasing. This is the result of considering more fuel-efficient vehicles and also purchasing higher within their consideration set fuel economy range. The degree to which the consumer adjusts is shown to correspond to the importance they place on the environment during their shopping process. Increased consideration and adoption of alternative fuel vehicles are found to be one mechanism the consumer uses to make these adjustments. Finally, we highlight how changing gasoline prices result in differing consideration set behavior for buyers of low and high fuel economy vehicles.
Description
Thesis: S.M. in Engineering and Management, Massachusetts Institute of Technology, System Design and Management Program, September, 2020
Cataloged from the official version of thesis.
Includes bibliographical references (pages 56-57).
Subjects
Engineering and Management Program.
System Design and Management Program.
MIT Department
Massachusetts Institute of Technology. Engineering and Management Program
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MIT theses may be protected by copyright. Please reuse MIT thesis content according to the MIT Libraries Permissions Policy, which is available through the URL provided.
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