Working Paper: NBER ID: w16974
Authors: Soren T. Anderson; Ryan Kellogg; James M. Sallee
Abstract: A full understanding of how gasoline prices affect consumer behavior frequently requires information on how consumers forecast future gasoline prices. We provide the first evidence on the nature of these forecasts by analyzing two decades of data on gasoline price expectations from the Michigan Survey of Consumers. We find that average consumer beliefs are typically indistinguishable from a no-change forecast, justifying an assumption commonly made in the literature on consumer valuation of energy efficiency. We also provide evidence on circumstances in which consumer forecasts are likely to deviate from no-change and on significant cross-consumer forecast heterogeneity.
Keywords: gasoline prices; consumer beliefs; energy efficiency; forecasting
JEL Codes: D84; L62; Q40; Q41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Average consumer beliefs about future gasoline prices (Q47) | No-change forecast (F37) |
| Current gasoline prices (Q31) | Average consumer forecast (E27) |
| 2008 financial crisis (F65) | Consumer expectations deviation from no-change forecast (C53) |
| State-level price changes (E30) | Consumer forecasts responsiveness (E27) |
| Tax changes (H29) | Consumer expectations (D12) |
| Consumer beliefs about future gasoline prices (Q47) | Forecast accuracy varies with economic conditions (E37) |