Abstract
Vehicle fuel efficiency has taken on more economic and environmental significance due to the rise in gasoline prices in 2007/2008. We examine adoption of fuel efficiency technologies by the US automobile industry between 1985 and 2002 and consider the environmental implications. The technology efficient frontier between vehicle weight and fuel efficiency of the US automobile fleet did not move outward significantly for an extended period in the 1980s and 1990s indicating a lack of company- or industry-wide adoption of new fuel efficiency technologies. While the firm with inferior technology capability did push its efficient frontier outward to close the technology gap, the two leading firms’ efficient frontiers first showed signs of possible regression in the early 1990s, and did not move outward significantly until the mid 1990s. Several managerial and policy options are examined for improving vehicle fuel efficiency.
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