Consumers' responses to fuel-efficient vehicles: a critical review of econometric studies

In an effort to conserve fuel, Congress required that automobile manufacturers increase the average fuel efficiency of the vehicles which they sell. The extent to which this policy is successful in conserving fuel depends on how consumers respond to the more fuel-efficient vehicles. The present paper reviews previous economic research on automobile demand and examines what this research can tell us about how consumers will respond to fuel-efficient vehicles. Three categories of research are reviewed, namely aggregate econometric studies, disaggregate econometric studies, and hedonic price analyses. It is shown that insufficient variation and too large covariation among automobile characteristics (such as price, weight and length) are problems which hinder the usefulness of each type of analysis. Two methods to alleviate these problems are proposed for future research.