International Review of Environmental and Resource Economics > Vol 5 > Issue 2

Evaluating the Consumer Response to Fuel Economy: A Review of the Literature

Gloria Helfand, U.S. Environmental Protection Agency, Assessment and Standards Division, Office of Transportation and Air Quality, USA, Ann Wolverton, U.S. Environmental Agency, National Center for Environmental Economics, USA,
Suggested Citation
Gloria Helfand and Ann Wolverton (2011), "Evaluating the Consumer Response to Fuel Economy: A Review of the Literature", International Review of Environmental and Resource Economics: Vol. 5: No. 2, pp 103-146.

Published: 23 May 2011
© 2011 G. Helfand and A. Wolverton
Environmental Economics
Consumer behaviorVehicle purchase decisionsFuel economyEnergy paradoxVehicle choice

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In this article:
1 Introduction
2 State of the Art in Vehicle Choice Modeling
3 Do Consumers Value Fuel Economy "Correctly?"
4 Why Producers May Not Provide as Much Fuel Efficiency as Consumers Want to Buy
5 Conclusion


How consumers evaluate trade-offs between the cost of buying additional fuel economy and the expected fuel savings that result is an important underlying determinant of the overall cost of national fuel economy standards. Models of vehicle choice are a means to predict the change in consumers' vehicle purchase patterns, as well as the effects of these changes on compliance costs and consumer surplus. This paper surveys the literature on vehicle choice models and finds a wide range in methods and results. A large puzzle raised is whether automakers build into their vehicles as much fuel economy as consumers are willing to purchase. This paper examines possible reasons why there may be a gap between the amount consumers are willing to pay for fuel economy and the amount that automakers provide, though there is insufficient evidence on the relative roles of these various hypotheses. Further research on the role of fuel economy in consumer vehicle purchases is needed to assist in understanding the welfare effects of fuel economy regulation.