New Passenger Vehicle Demand Elasticities: Estimates and Policy Implications

In this working paper, the authors estimate a set of demand elasticities for new passenger vehicles in order that can inform policy analysis and fuel economy regulations.



Aug. 23, 2023


Benjamin Leard and Yidi Wu


Working Paper

Reading time

1 minute


We apply a simple methodology to estimate own- and cross-price elasticities of new passenger vehicle demand based on household-level survey data. Our methodology combines own-price elasticity estimates with diversion fractions constructed from second-choice data. We obtain a set of elasticities that are relevant for policy analysis, including an aggregate market elasticity, a matrix of car and light truck elasticities, and a matrix of gasoline and electric vehicle (EV) elasticities. Our results have implications for evaluating incidence of fuel economy and greenhouse gas standards for passenger vehicles and policies for increasing EV adoption.


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