The Cost of Fuel Economy in the Indian Passenger Vehicle Market

42 Pages Posted: 2 May 2011

See all articles by Randy Chugh

Randy Chugh

Government of the United States of America - Department of Justice

Maureen Cropper

University of Maryland - Department of Economics; Resources for the Future

Urvashi Narain

World Bank

Multiple version iconThere are 2 versions of this paper

Date Written: April 2011

Abstract

To investigate how fuel economy is valued in the Indian car market, we compute the cost to Indian consumers of purchasing a more fuel-efficient vehicle and compare it to the benefit of lower fuel costs over the life of the vehicle. We use hedonic price functions for four market segments (petrol hatchbacks, diesel hatchbacks, petrol sedans, and diesel sedans) to compute 95 percent confidence intervals for the marginal cost to the consumer of an increase in fuel economy. We find that the associated present value of fuel savings falls within the 95 percent confidence interval for some specifications, in all market segments, for the years 2002 through 2006. Thus, we fail to consistently reject the hypothesis that consumers appropriately value fuel economy. When we reject the null hypothesis, the marginal cost of additional fuel economy exceeds the present value of fuel savings, suggesting that consumers may, in fact, be overvaluing fuel economy.

Suggested Citation

Chugh, Randy and Cropper, Maureen L. and Narain, Urvashi, The Cost of Fuel Economy in the Indian Passenger Vehicle Market (April 2011). NBER Working Paper No. w16987, Available at SSRN: https://ssrn.com/abstract=1825769

Randy Chugh (Contact Author)

Government of the United States of America - Department of Justice ( email )

Maureen L. Cropper

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States

Resources for the Future ( email )

1616 P Street, NW
Washington, DC 20036
United States

Urvashi Narain

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
12
Abstract Views
693
PlumX Metrics