THE EFFECTS OF THE CORPORATE-AVERAGE-FUEL-EFFICIENCY-STANDARDS IN THEUS

This paper examines the effects of the Corporate Average Fuel Economy Standards (CAFE) on automobile sales, prices, and fuel consumption. Fi rst a discrete choice model of automobile demand and a continuous mode l of vehicle utilization are estimated using micro data from the Consu mer Expenditure Survey for 1984-1990. Next, the demand side model is c ombined with a model of oligopoly and product differentiation on the s upply side. With these elements in place, the effects of the CAFE regu lation are assessed through simulations, and compared to the effects o f alternative policy instruments, such as an increase in gasoline tax.