Regulated and Unregulated Substitutes: Aversion Effects of an Ethanol Mandate

17 Pages Posted: 26 Feb 2016

See all articles by Michael D. Noel

Michael D. Noel

Texas Tech University

Travis Roach

University of Central Oklahoma - Department of Economics

Date Written: April 2016

Abstract

One approach for handling more aggressive goals under an ethanol mandate is to use a “dual blend” mandate in which both the preferred new ethanol blend and the old (possibly ethanol‐free) blend of gasoline coexist. Highlighting the case of New South Wales, Australia, we show the dual nature of such a mandate can potentially lead to significant costs when consumers are averse. We show consumers en masse rejected the new blend and paid 43 cents per gallon more to avoid it. Not even the second of the mandate's four targets could be reached, and the consumer cost was substantial.

JEL Classification: L51, Q41, Q42, Q51

Suggested Citation

Noel, Michael D. and Roach, Travis, Regulated and Unregulated Substitutes: Aversion Effects of an Ethanol Mandate (April 2016). Economic Inquiry, Vol. 54, Issue 2, pp. 1150-1166, 2016, Available at SSRN: https://ssrn.com/abstract=2738263 or http://dx.doi.org/10.1111/ecin.12258

Michael D. Noel (Contact Author)

Texas Tech University ( email )

237 Holden Hall
Box 41014
Lubbock, TX 79407
United States

Travis Roach

University of Central Oklahoma - Department of Economics ( email )

Edmond, OK 73034
United States

HOME PAGE: http://www.travisroach.com

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