When Adding a Fuel Efficient Car Increases an Automaker's Cafe Penalty
10 Pages Posted: 18 Feb 2004
Date Written: February 13, 2004
We derive the conditions that cause an automaker's Corporate Average Fuel Economy (CAFE) fine to increase when it sells an additional, fuel efficient car. Raising the CAFE standards would broaden the range of fuel economies that produce this effect.
Keywords: Corporate average fuel economy, CAFE, fuel efficiency, automobile regulation
JEL Classification: K32, L51, L62
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