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

Fingerprint

electric vehicle
premium
sale
environmental policy
economist
savings
purchase
pricing
expenditures
Rational choice
minority
innovation
regulation
efficiency
economy
Electric vehicle
costs
performance
economics
Payback

Keywords

  • D61
  • G18
  • JEL
  • L91

ASJC Scopus subject areas

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

Cite this

Most Consumers Don't Buy Hybrids : Is Rational Choice a Sufficient Explanation? / Duncan, Denvil; Ku, Arthur Lin; Julian, Alyssa; Carley, Sanya; Siddiki, Saba; Zirogiannis, Nikolaos; Graham, John D.

In: Journal of Benefit-Cost Analysis, 01.01.2019, p. 1-38.

Research output: Contribution to journalArticle

Duncan, Denvil ; Ku, Arthur Lin ; Julian, Alyssa ; Carley, Sanya ; Siddiki, Saba ; Zirogiannis, Nikolaos ; Graham, John D. / Most Consumers Don't Buy Hybrids : Is Rational Choice a Sufficient Explanation?. In: Journal of Benefit-Cost Analysis. 2019 ; pp. 1-38.
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