Understanding Stated Preferences for Durable Goods: the Case of Hybrid Cars

Speaker: Maria Loureiro, Department of Economic Theory, University of Santiago de Compostela, Spain    

Introduction

Understanding the motives behind individuals’ preferences for hybrid cars seems quite relevant in order to implement appropriate and effective strategies to promote this clean driving technology. We contribute to the existing literature by assessing the impact of loss aversion and regret avoidance on green car choices.

Methods

To understand drivers’ preferences for cars (hybrid versus conventional cars) we conducted a discrete choice experiment in a representative sample of the Spanish population.

Results

Results from a nested logit model show that in our sample, the participants’ mean willingness to pay a premium in order to change from a conventional to a hybrid car (ceteris paribus) is well below the current mark up for hybrid cars. Thus, current economic subsidies applied to promote these cars in isolation may have a very limited effect in extending their use. In addition, we find that older drivers, individuals who experience loss aversion, and those who avoid suffering regret or deception caused by theri market choices, show evidence of the status quo bias. These results may be related to the fact that choices of durable goods are more reflective than those of non-durable goods. (Djamel Rahmani and Maria L. Loureiro)