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Working papers
Working Paper
Rationality & Competition CRC TRR 190 No. Discussion Paper No. 147
Vlada Pleshcheva (2019)
Subject(s)
Health and environment; Marketing
Keyword(s)
Choice architecture, environmental impact, framing effects, vehicle choice
JEL Code(s)
D12, D90, M31, Q51
The present study investigates how the framing of information on the environmental impact of vehicles affects consumers’ preferences for identical improvements in car quality. In online choice experiments, the effects of two metrics (fuel consumption vs. CO2 emissions) and three scales of one metric (CO2 in kg/km vs. g/km vs. g/100km) are examined. First, from a technical perspective, fuel consumption (FC) and CO2 emissions are linearly connected by a constant factor and are thus isomorphic in describing the environmental friendliness of a car. Second, rescaling identical information should not change consumer decisions. However, as this study demonstrates, the type of information presented to consumers significantly affects consumers’ valuation of environmental benefits from a reduction in FC or CO2. The study’s contribution lies in quantifying the differences in consumers’ preferences for two measures of the same information that have not been previously directly compared. Additionally, the differences in the framing effects are explored for diesel and gasoline vehicles. The estimation accounts for heterogeneity in the tastes, environmental attitudes and knowledge of the respondents. The insights of this study serve to guide policymakers and car manufacturers on how to present information on car offers.
Working Paper
Rationality & Competition CRC TRR 190 No. Discussion Paper No. 140
Vlada Pleshcheva, Daniel Klapper, Till Dannewald (2019)
Subject(s)
Marketing
Keyword(s)
Energy-efficiency paradox, hedonic discrete choice model, vehicle purchase, willingness-to-pay
In this paper, we first recover the individual valuation of expected future fuel costs at the time of a car purchase and then explore how various factors relate to the recovered consumer undervaluation of fuel savings (on average, consumers’ willingness-to-pay for a €1 reduction in fuel costs is below €0.20). For this purpose, we use survey data on the individual purchases of new passenger cars in Germany over seven years and use the expected driving intensity and the expected length of car ownership as stated by consumers to construct individual values of the present-discounted fuel costs. We then compare the variation in these values to that in the prices paid by buyers of cars with identical specifications. Individual tastes for car attributes are recovered nonparent metrically within a “preference inversion” procedure for diesel and gasoline vehicles of various car classes, controlling for unobservant product attributes, correlations in tastes for car features, and the possibility to deduct a portion of annual fuel costs from taxes. Our results indicate that consumers’ better financial ability, higher education, and brand loyalty facilitate a better understanding of the benefits of investments in fuel-efficient vehicles.