Gasoline Prices, Beliefs, and the Energy Efficiency

Abstract

This paper fills the gaps in cognitive process understanding of human behaviors between future gasoline price perception and the willingness to purchase hybrid vehicles. How consumers form future gasoline price beliefs and its impacts on decision making process is underexplored in literature. Using the monthly Michigan Survey of Consumers conducted in July 2008 to November 2008, we pool five cross sections and run a generalized linear model. We find statistically significant evidence that current and long-term future gasoline price perceptions affect the willingness to buy hybrid vehicles. This paper also shows the long-term future gasoline price perceptions predict better than the short-term future gasoline price beliefs. Understanding the effect of gasoline price on the willingness to buy more fuel-efficient cars has an important policy implication for the gasoline tax and other economic incentives to internalize negative externalities.