Campus Units

Economics

Document Type

Article

Publication Version

Accepted Manuscript

Publication Date

7-3-2018

Journal or Book Title

American Journal of Agricultural Economics

DOI

10.1093/ajae/aay041

Abstract

Meeting US ethanol blending mandates proposed by the Environmental Protection Agency will require a substantial number of motorists with flex-fuel vehicles to switch from low ethanol-gasoline blends to high ethanol-gasoline blends. The lower the willingness to pay for high-ethanol blends, the greater the cost of complying with the proposed mandates. Existing estimates of the willingness to pay for high-ethanol blends use data from Brazil (where consumers have knowledge of and experience with high-ethanol blends), data generated when retail prices greatly favored low-ethanol blends, or stated data collected from mail and online surveys. To obtain more accurate estimates of US willingness to pay, we conducted an intercept survey in five US states of motorists with flex-fuel vehicles as they were refueling. We address a sample-selection problem caused by the lack of stations that sell high-ethanol blends; consumers who have a high willingness to pay are more likely to seek out the stations and hence to show up in our sample. We attempt to overcome the problem caused by prices favoring low-ethanol blends by augmenting revealed preference data with stated preference data generated by hypothetical prices that tended to favor high-ethanol blends. Our estimates of mean willingness to pay shows that the price at which the average US consumer will switch fuels is substantially below the price that equates the cost per mile of driving. The large discount that the average US consumer requires to switch suggests that the cost of proposed ethanol mandates will be higher than previously estimated.

JEL Classification

Q18, Q41, Q42

Comments

This article is published as Pouliot,S., Liao, K.A., Babcock, B.A.; Estimating Willingness to Pay for E85 in the United States Using an Intercept Survey of Flex Motorists. American Journal of Agricultural Economics, July 3 2018; Doi: 10.1093/ajae/aay041. Posted with permission.

Copyright Owner

Oxford Academic

Language

en

File Format

application/pdf

Available for download on Friday, July 03, 2020

Published Version Working Paper

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