MODELING THE RESPONSE OF THE DOMESTIC AUTOMOBILE INDUSTRY TO MANDATES FOR INCREASED FUEL ECONOMY

Fuel economy mandates for new automobiles sold in the United States were legislated in the Energy Policy and Conservation Act of 1975. A number of studies have estimated the technical feasibility of the firms producing cars that comply with the mandates, and several studies have investigated a few of the direct economic effects resulting from full compliance by such firms. This paper systematically anlyzes the economic incentives the mandates provide to the firms and the alternative responses the firms may make. A behavioral model of joint profit maximization for the domestic automobile industry is initially geared to 1976 market data when no mandates were in effect. The parameters of the model are then used to estimate the equilibrium changes in prices costs sales profits individual and aggregate fuel economies, and governmental revenues when various levels of fuel economy mandates are imposed for 1985. The model indicates that domestic automobile manufactures will react to fuel economy mandates by downsizing and adopting new but currently available fuel-saving technologies rather than forcing major changes in the mix of cars sold. This strategy should allow them to produce cars with sales-weighted-average gasoline consumption of less than 8.55 L/100 km (greater than 27 1/2 mpg) by 1985. /Author/

Media Info

  • Media Type: Print
  • Features: Figures; References; Tables;
  • Pagination: pp 1-7
  • Monograph Title: Energy efficiency of various transportation modes
  • Serial:

Subject/Index Terms

Filing Info

  • Accession Number: 00197120
  • Record Type: Publication
  • ISBN: 0309028345
  • Files: TRIS, TRB
  • Created Date: Sep 15 1979 12:00AM