On the Incentives to Provide Fuel-Efficient Automobiles

We argue that the provision of more fuel-efficient cars necessitates specific aerodynamic shapes. We show that the presence of this technological constraint may reduce the incentives to provide fuel efficiency. In equilibrium, cars become more similar and aerodynamic as fuel prices increase. However, the provided level of fuel efficiency falls short of the social optimal one such that a fuel-economy standard is welfare-enhancing.

15. Juni 2001

Autoren Hans Degryse Andreas Irmen

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Professor Hans Degryse, Ph.D.
Professor Hans Degryse, Ph.D.

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