High Frequency Evidence on the Demand for Gasoline†

High Frequency Evidence on the Demand for Gasoline† AbstractDaily city-level expenditures and prices are used to estimate the price responsiveness of gasoline demand in the United States. Using a frequency of purchase model that explicitly acknowledges the distinction between gasoline demand and gasoline expenditures, the price elasticity of demand is consistently found to be an order of magnitude larger than estimates from recent studies using more aggregated data. Estimating demand using higher levels of spatial and temporal aggregation is shown to produce increasingly inelastic estimates. A decomposition is then developed and implemented to understand the relative importance of several different factors in explaining this result. (JEL C51, L71, Q35) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Journal: Economic Policy American Economic Association

High Frequency Evidence on the Demand for Gasoline†

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Publisher
American Economic Association
Copyright
Copyright © 2017 © American Economic Association
ISSN
1945-7731
D.O.I.
10.1257/pol.20140093
Publisher site
See Article on Publisher Site

Abstract

AbstractDaily city-level expenditures and prices are used to estimate the price responsiveness of gasoline demand in the United States. Using a frequency of purchase model that explicitly acknowledges the distinction between gasoline demand and gasoline expenditures, the price elasticity of demand is consistently found to be an order of magnitude larger than estimates from recent studies using more aggregated data. Estimating demand using higher levels of spatial and temporal aggregation is shown to produce increasingly inelastic estimates. A decomposition is then developed and implemented to understand the relative importance of several different factors in explaining this result. (JEL C51, L71, Q35)

Journal

American Economic Journal: Economic PolicyAmerican Economic Association

Published: Aug 1, 2017

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