Working Paper: NBER ID: w18610
Authors: Meghan R. Busse; Christopher R. Knittel; Florian Zettelmeyer
Abstract: Many consumers are keenly aware of gasoline prices, and consumer responses to gasoline prices have been well studied. In this paper, by contrast, we investigate how gasoline prices affect the automobile industry: manufacturers and dealerships. We estimate how changes in gasoline prices affect equilibrium prices and sales of both new and used vehicles of different fuel economies. We investigate the implications of these effects for individual auto manufacturers, taking into account differences in manufacturers' vehicle portfolios. We also investigate effects on manufacturers' affiliated dealership networks, including effects implied by the changes in used vehicle market outcomes.
Keywords: Gasoline Prices; Automobile Industry; Fuel Economy; Consumer Behavior
JEL Codes: L1; L2; L9; Q4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Higher gasoline prices (R48) | Increased fuel economy in vehicle purchases (R48) |
| Higher gasoline prices (R48) | Decrease in market share for low fuel economy vehicles (F12) |
| Higher gasoline prices (R48) | Increase in market share for high fuel economy vehicles (D16) |
| Higher gasoline prices (R48) | Changes in consumer behavior towards vehicle fuel economy choices (D12) |
| Changes in consumer behavior towards vehicle fuel economy choices (D12) | Market shares of vehicles (L62) |
| Higher gasoline prices (R48) | Variations in transaction prices for new and used vehicles (R48) |