Attribute substitution in household vehicle portfolios
James Archsmith, Kenneth Gillingham, Christopher R. Knittel, David Rapson
Abstract
Abstract Roughly three quarters of vehicles are purchased into multi‐car households. We study whether households are willing to substitute attributes, such as fuel economy, across vehicles within their portfolio. We develop a novel strategy to separately identify idiosyncratic preferences for an attribute from these within‐portfolio effects. Using the universe of household vehicle registration records in California over a 6‐year period, we find that two‐car households exhibit strong substitution across vehicles when faced with an exogenous change to fuel intensity of a kept vehicle. This effect can erode a substantial portion of the benefit from major policies, such as Cash‐for‐Clunkers.