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Abstract

In this paper, we formulate and estimate a mixed logit model of consumer vehicle choices with micro-level data to examine the effect of safety concerns on their vehicle choices, especially on the preference for various vehicle characteristics linked to vehicle safety (MPG, weight, size, etc). Further, using the demand estimates, we simulate consumers’ vehicle choices under alternative fuel economy standards that will result in new product offerings from automakers. We then calculate and compare the welfare change for consumers with different safety concerns. The estimation results suggest that consumers’ safety concerns have significant impacts on their vehicle choices and their preference over safety-related vehicle characteristics.

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