Document Type

Honors Project - Open Access

Abstract

This paper examines the effect of different pieces of information in fuel economy labels on consumer choice using data from a discrete choice experiment. In the experiment, participants are randomly assigned to treatment groups and asked to make choices between vehicle alternatives. Fuel economy labels vary over treatment group. Individual-specific discount rates are elicited in the survey, allowing this analysis to disentangle the effects of information and discount rate on choice. The analysis estimates each individual's willingness to pay for a one dollar reduction in present value of operating costs, then examines how information affects the willingness to pay coefficient. I find that certain pieces of information, especially estimated cost information, increase willingness to pay. The degree of valuation is highly sensitive to discount rate. I find substantial overvaluation of fuel economy using individual discount rates and full valuation using a uniform 5% rate.

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Economics Commons

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