Consumers' response to price increases: Evidence from gasoline markets


Tsanko, Ilona


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URN: urn:nbn:de:bsz:180-madoc-675196
Document Type: Working paper
Year of publication: 2024
The title of a journal, publication series: ZEW Discussion Papers
Volume: 24-020
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
Subject: 330 Economics
Classification: JEL: D12 , Q41 , L91 , L98,
Keywords (English): demand response , gasoline prices , consumers search , fuel consumption
Abstract: Understanding how consumers respond to price increases is key when designing price-related policies. Using microdata on vehicle usage and paid fuel prices, I analyze consumers' response, focusing on three channels of mitigation: distance driven, fuel efficiency, and search. On average, consumers mitigate 38 percent of a price increase through these channels. Reducing distance driven is the primary channel of mitigation. Increased search efforts mitigate up to 11 percent of a price increase. Response levels vary significantly with newer vehicles' owners mitigating up to 88 percent of a price increase, while older vehicle owners achieve can mitigate up to 45 percent.




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