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STICERD Industrial Organisation Seminars

Household Diversification: The Vehicle Portfolio Effect

Dave Rapson (University of California, Davis), joint with James Archsmith, Kenneth Gillingham, Christopher Knittel

Monday 20 March 2017 12:30 - 14:00

Due to the onging coronavirus outbreak, many of our seminars and public events this year will continue as online seminars. Please check our website listings and Twitter feed @STICERD_LSE for updates.


About this event

Households value diversity in many settings, including financial assets, gender of children, and occupations. This paper quantifies the extent to which multi-car households exhibit preferences for a diversified vehicle portfolio. We deploy a novel identification strategy to examine how an exogenous change in the fuel economy of a kept vehicle affects a household's choice of a second vehicle purchased and find strong preferences for a diverse portfolio in fuel economy. We further find that this effect operates via car attributes that are correlated with fuel economy, including vehicle footprint and weight. This new evidence suggests that the portfolio effect exerts a strong force that may erode a substantial portion of the expected future gasoline savings from fuel economy standards, particularly those that are attribute-based.

Industrial Organisation seminars are held on Mondays in term time at 12:30-14:00, ONLINE, unless specified otherwise.

Seminar organiser: Alessandro Gavazza.

For further information please contact Lubala Chibwe, either by email: l.chibwe@lse.ac.uk.

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