Attribute substitution in household vehicle portfolios

Abstract

Roughly three quarters of vehicles are purchased into multi-car households. We study whether households are willing to substitute attributes, such as fuel economy, across vehicles within their portfolio. We develop a novel strategy to separately identify idiosyncratic preferences for an attribute from these within-portfolio effects. Using the universe of household vehicle registration records in California over a 6-year period, we find that two-car households exhibit strong substitution across vehicles when faced with an exogenous change to fuel intensity of a kept vehicle. This effect can erode a substantial portion of the benefit from major policies, such as Cash-for-Clunkers.