Do Long-Haul Truckers Undervalue Future Fuel Savings?

44 Pages Posted: 14 Jan 2016 Last revised: 11 Nov 2017

See all articles by Jacob Adenbaum

Jacob Adenbaum

Federal Reserve Banks - Federal Reserve Bank of New York

Adam M. Copeland

Federal Reserve Bank of New York

John J. Stevens

Federal Reserve Board - Division of Research and Statistics

Multiple version iconThere are 2 versions of this paper

Date Written: 2016-01-01

Abstract

The U.S. federal government enacted fuel efficiency standards for medium and heavy trucks for the first time in September 2011. Rationales for using this policy tool typically depend upon frictions existing in the marketplace or consumers being myopic, such that vehicle purchasers undervalue the future fuel savings from increased fuel efficiency. We measure by how much long-haul truck owners undervalue future fuel savings by employing recent advances to the classic hedonic approach to estimate the distribution of willingness-to-pay for fuel efficiency. We find significant heterogeneity in truck owners’ willingness-to-pay for fuel efficiency, with the elasticity of fuel efficiency to price ranging from 0.51 at the 10th percentile to 1.33 at the 90th percentile, and an average of 0.91. Combining these results with estimates of future fuel savings from increases in fuel efficiency, we find that long-haul truck owners’ willingness-to-pay for a 1 percent increase in fuel efficiency is, on average, just 29.5 percent of the expected future fuel savings. These results suggest that introducing fuel efficiency standards for heavy trucks might be an effective policy tool to raise medium and heavy trucks’ fuel economy.

Keywords: fuel efficiency standards, durable goods, discrete-choice demand estimation

JEL Classification: D22, L51, L92

Suggested Citation

Adenbaum, Jacob and Copeland, Adam M. and Stevens, John J., Do Long-Haul Truckers Undervalue Future Fuel Savings? (2016-01-01). FRB of NY Staff Report No. 756, Available at SSRN: https://ssrn.com/abstract=2714275

Jacob Adenbaum (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Adam M. Copeland

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

John J. Stevens

Federal Reserve Board - Division of Research and Statistics ( email )

20th and C Streets, NW
Washington, DC 20551
United States

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