Consumer Valuation of Improvements in Fuel Economy and Reductions in Emissions of Vehicles in Turke

In this study, I estimate consumer valuation of reducing the adverse impact on the environment of car's operation and saving on fuel expenses from improved fuel economy. To estimate these valuations, I use a hedonic model of new passenger cars sold in Turkey from June to December 2015. The estimated implicit value of improved fuel economy is then compared to the present discounted value of the associated fuel-cost savings expected throughout the vehicle's economic life. The results indicate that the consumer valuation of improved fuel economy is less than the present discounted value of associated fuel-cost savings, implying that imposing standards on fuel economy in the country may be more effective for addressing the concerns about the environmental consequences of fuel use by leading people to buy more fuel-efficient cars.;Given that an improvement in fuel economy might be correlated with reductions in tailpipe emissions, I collect information on various attributes that might indicate a reduction in an adverse environmental impact of a car's operation in order to disentangle the consumer valuation of improved fuel economy from the consumer valuation of reducing the adverse environmental impacts of their cars. Results indicate that the model which additionally accounts for the attributes that might indicate reductions in adverse environmental impacts of car's operation fits the data statistically significantly better. In addition, the estimated consumer valuation of improved fuel economy significantly declined in absolute value after including those attributes in the model. This suggests that not accounting for the consumer valuation of reducing the adverse environmental impact of their vehicles in the empirical model might upward bias the estimation of the consumer valuation of improved fuel economy. Results also indicate that consumers might significantly value reducing adverse environmental impacts of tailpipe emissions except NOx from their vehicles. Given that relatively more information is provided about CO 2 emissions than NOx, this result might suggest that policymakers need to provide more information about NOx emissions to car buyers.;In addition, the results also indicate that consumers respond significantly differently to a change in fuel prices from how they respond to a change in fuel consumptiveness---the reciprocal of fuel economy---of a vehicle for a given change in the fuel cost of driving a certain distance. A preliminary analysis about how changes in fuel prices and characteristics of production facilities shift the consumer's bid function and producer's offer function is also briefly discussed. Tracing such shifts might be used in the second-stage of the hedonic model to determine the demand and supply functions of fuel economy in the future research.