Are Consumers Myopic? Evidence from New and Used Car Purchases

We investigate whether car buyers are myopic about future fuel costs. We estimate the e↵ect of gasoline prices on short-run equilibrium prices of cars of di↵erent fuel economies. We then compare the implied changes in willingness-to-pay to the associated changes in expected future gasoline costs for cars of di↵erent fuel economies in order to calculate implicit discount rates. Using di↵erent assumptions about annual mileage, survival rates, and demand elasticities, we calculate a range of implicit discount rates similar to the range of interest rates paid by car buyers who borrow. We interpret this as showing little evidence of consumer myopia.