Are Consumers Myopic? Evidence from New and Used Car Purchases
Author(s)
Busse, Meghan R; Zettelmeyer, Florian; Knittel, Christopher Roland
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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.
Date issued
2013-02Department
Sloan School of ManagementJournal
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
ISSN
0002-8282
1944-7981