What Do Consumers Believe About Future Gasoline Prices?

37 Pages Posted: 25 Apr 2011

See all articles by Soren Anderson

Soren Anderson

Michigan State University - Department of Economics; Michigan State University - Department of Agricultural Economics; National Bureau of Economic Research

Ryan Kellogg

University of California, Berkeley

James Sallee

University of Michigan at Ann Arbor

Date Written: April 2011

Abstract

A full understanding of how gasoline prices affect consumer behavior frequently requires information on how consumers forecast future gasoline prices. We provide the first evidence on the nature of these forecasts by analyzing two decades of data on gasoline price expectations from the Michigan Survey of Consumers. We find that average consumer beliefs are typically indistinguishable from a no-change forecast, justifying an assumption commonly made in the literature on consumer valuation of energy efficiency. We also provide evidence on circumstances in which consumer forecasts are likely to deviate from no-change and on significant cross-consumer forecast heterogeneity.

Suggested Citation

Anderson, Soren T. and Kellogg, Ryan and Sallee, James, What Do Consumers Believe About Future Gasoline Prices? (April 2011). NBER Working Paper No. w16974. Available at SSRN: https://ssrn.com/abstract=1820086

Soren T. Anderson (Contact Author)

Michigan State University - Department of Economics ( email )

East Lansing, MI 48824
United States

Michigan State University - Department of Agricultural Economics ( email )

East Lansing, MI 48824
United States

National Bureau of Economic Research ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ryan Kellogg

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

HOME PAGE: http://are.berkeley.edu/~kellogg/index.html

James Sallee

University of Michigan at Ann Arbor ( email )

500 S. State Street
Ann Arbor, MI 48109
United States

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