VARIATION IN PRODUCER RESPONSES TO AUTOMOBILE FUEL ECONOMY MANDATES

This paper investigates producer responses in the context of automobile fuel economy regulation. The Corporate Average Fuel Economy (CAFE) program mandated a near-doubling of automobile fuel efficiency between 1975 and 1985. In tandem with steep increases in the real price of gasoline, which would be expected to shift consumer demand away from "gas guzzlers," the CAFE mandate gave auto producers a huge product development challenge. The data analysis presented in this study shows that producer responses to the CAFE standards varied widely. First, the predictors of fuel economy improvement (size, weight, engine size, etc.) differed substantially when comparing Ford, Chrysler, General Motors, Japanese and European producers. Second, these predictors also vary depending on the size class (subcompact, compact, midsize, and full-size). These results suggest that the flexibility allowed for compliance with the CAFE standards has made a difference to producers, as they clearly did not respond in the same manner. Future public policy on fuel economy should take account of the complex variation both across size classes and among different producers.

Language

  • English

Media Info

  • Features: References; Tables;
  • Pagination: p. 785-803

Subject/Index Terms

Filing Info

  • Accession Number: 00727101
  • Record Type: Publication
  • Report/Paper Numbers: Volume 2
  • Files: TRIS
  • Created Date: Oct 22 1996 12:00AM