Most Consumers Don't Buy Hybrids: Is Rational Choice a Sufficient Explanation?

Denvil Duncan, Arthur Lin Ku, Alyssa Julian, Sanya Carley, Saba Siddiki, Nikolaos Zirogiannis, John D. Graham

Research output: Contribution to journalArticle

Abstract

Although federal regulation of vehicle fuel economy is often seen as environmental policy, over 70% of the estimated benefits of the 2017-2025 federal standards are savings in consumer expenditures on gasoline. Rational-choice economists question the counting of these benefits since studies show that the fuel efficiency of a car is reflected in its price at sale and resale. We contribute to this debate by exploring why most consumers in the United States do not purchase a proven fuel-saving innovation: the hybrid-electric vehicle (HEV). A database of 110 vehicle pairs is assembled where a consumer can choose a hybrid or gasoline version of virtually the same vehicle. Few choose the HEV. A total cost of ownership model is used to estimate payback periods for the price premiums associated with the HEV choice. In a majority of cases, a rational-choice explanation is sufficient to understand consumer disinterest in the HEV. However, in a significant minority of cases, a rational-choice explanation is not readily apparent, even when non-pecuniary attributes (e.g., performance and cargo space) are considered. Future research should examine, from a behavioral economics perspective, why consumers do not choose HEVs when pricing and payback periods appear to be favorable.

Original languageEnglish (US)
Pages (from-to)1-38
Number of pages38
JournalJournal of Benefit-Cost Analysis
DOIs
StatePublished - Jan 1 2019
Externally publishedYes

Keywords

  • D61
  • G18
  • JEL
  • L91

ASJC Scopus subject areas

  • Economics and Econometrics
  • Public Administration
  • Sociology and Political Science

Fingerprint Dive into the research topics of 'Most Consumers Don't Buy Hybrids: Is Rational Choice a Sufficient Explanation?'. Together they form a unique fingerprint.

  • Cite this