New Vehicle Consumption and Fuel Efficiency: A Nested Logit Approach

Using data from a 1989 household survey of new vehicle buyers, this paper develops and estimates a nested logit model of new vehicle demands. In comparison with the more restrictive multinomial logit model, which assumes that the error terms are uncorrelated, the results support a nested structure o...

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Bibliographic Details
Published in:Transportation research. Part E, Logistics and transportation review Logistics and transportation review, 1998-03, Vol.34 (1), p.39-51
Main Authors: McCarthy, Patrick S., Tay, Richard S.
Format: Article
Language:English
Subjects:
Automobiles
Consumer behavior
Correlation analysis
Demand
Energy efficiency
fuel efficiency
fuel efficiency vehicle choice nested logit
nested logit
Polls & surveys
Studies
vehicle choice
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Summary:Using data from a 1989 household survey of new vehicle buyers, this paper develops and estimates a nested logit model of new vehicle demands. In comparison with the more restrictive multinomial logit model, which assumes that the error terms are uncorrelated, the results support a nested structure of vehicle choice in which the error terms for purchases within the same fuel efficiency category are correlated. Among the findings, improvements in vehicle size, safety and quality increase a make/model’s demand. Females, lower income households, younger consumers, non-white purchasers, and buyers in more densely populated areas exhibit higher demands for more fuel efficient vehicles. The results also indicate that vehicle demands have an approximate unitary elasticity with respect to capital cost and are elastic with respect to operating costs.
ISSN:1366-5545
1878-5794
DOI:10.1016/S1366-5545(97)00042-2