Combines a disaggregate model of automobile demand and utilization with an aggregate oligopoly and product differentiation model.
Author: Pinelopi Koujianou Goldberg
ABSTRACT: This paper examines the effects of the CAFE on auto sales, prices and fuel consumption. First a discrete choice modle of automobile demand and a continuous model of vehicle utilization are estimated using micro data from the Comsumer Expenditure Survey for 1984-1990. Next the demand side model is combined with a model of oligopoly and product differentiation on the supply side. With these elements in place, the effects of the CAFE regulation are assessed through simulations, and compared to the effects of alternative policy instruments such as an increase in gasoline taxes.
Kailer's Comments: A sophisticated partial equilibrium model is built and much of it sailed clear over my head. The author never once mentioned the different regulation standards for vehicle types. She concluded with a weak endorsement of the current policy. This may have been one of the most boring papers I have ever read.
Relevence: Moderate
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