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15 J. Consumer Pol'y 1 (1992)

handle is hein.journals/jrncpy15 and id is 1 raw text is: Rachel Dardis and Horacio Soberon-Ferrer
The Demand for Small Cars in the United
States: Implications for Energy Conservation
ABSTRACT. The purpose of this paper was to investigate the impact of household
characteristics and preferences for Japanese cars on the demand for small cars in
the United States. Two stage probit analysis was used to examine the impact of
various explanatory variables on the purchase decision. The results indicated that
preferences for Japanese cars, income, price and several household characteristics
had a significant impact on the probability of purchasing a small car. The results of
this study provide support for freer trade in automobiles and higher gasoline taxes
as energy conservation strategies.
The need for energy conservation in the United States in recent
years has increased due to environmental and oil dependency
concerns. Fossil fuel burning causes environmental pollution and
ozone depletion and may play a major role in global warming while
oil imports account for a significant portion of the U.S. trade deficit.
Individual consumers could alleviate some of these problems by
changing their consumption patterns including their use of automo-
biles. This occurred after the energy crisis of 1973 when the demand
for small cars increased due to increases in the price of gasoline and
decreases in real income. Congress also introduced corporate
average fuel economy standards (CAFE) in 1975 which became
effective in 1978. These standards set a fleet average of 18 miles per
gallon for 1978 models with increases each year culminating in 27.5
miles per gallon for 1985 models. As a result of these developments
the market share of mid-sized and large cars declined from 58
percent in 1978 to 38 percent in 1981 while the average fuel
efficiency of U.S. cars increased from 20 miles per gallon in 1979 to
25 miles per gallon in 1981 (Crandall, Gruenspecht, Keeler, & Lave,
1986, p. 122; Kee, 1991).
The situation then changed due to declines in gasoline prices and
the belief that the energy crisis had passed.t In 1985 Robert
Crandall stated that the societal case for increasing energy con-

Journal of Consumer Policy 15: 1-20, 1992.
© 1992 Kluwer Academic Publishers. Printed in the Netherlands.

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