Society For Risk Analysis Annual Meeting 2017

Session Schedule & Abstracts


* Disclaimer: All presentations represent the views of the authors, and not the organizations that support their research. Please apply the standard disclaimer that any opinions, findings, and conclusions or recommendations in abstracts, posters, and presentations at the meeting are those of the authors and do not necessarily reflect the views of any other organization or agency. Meeting attendees and authors should be aware that this disclaimer is intended to apply to all abstracts contained in this document. Authors who wish to emphasize this disclaimer should do so in their presentation or poster. In an effort to make the abstracts as concise as possible and easy for meeting participants to read, the abstracts have been formatted such that they exclude references to papers, affiliations, and/or funding sources. Authors who wish to provide attendees with this information should do so in their presentation or poster.

Common abbreviations

T3-A
Symposium: New Perspectives on the Energy Paradox

Room: Salon A   1:30 pm–3:00 pm

Chair(s): Randall Lutter   lutter@rff.org

Sponsored by Economics and Benefits Analysis Specialty Group and Society for Benefit-Cost Analysis

Over the last few years regulators have sought to limit risks from anthropogenic climate change by mandating that a large set of equipment and vehicles—including refrigerators, washing machines, cars and trucks-- meet minimum energy efficiency standards. Further, they often claim that the value of the energy savings to the users of these more efficient machines exceeds the incremental costs to manufacturers of delivering greater energy efficiency, thereby challenging fundamental notions of how markets work. This symposium presents new evidence about this energy paradox. Fraas and Miller collect data on class action suits against manufacturers of devices and devices that should comply with certain energy efficiency standards but appear to have higher risk of product failures. Their work discusses 1) regulatory agency treatment of the risk of resulting product failures, 2) the nature of identified product failures, and 3) the effectiveness of market and legal institutional responses to these problems. Fraas and Lutter analyze newly collected data on heavy duty trucks to assess whether trailers are less likely to carry fuel efficient equipment when owned by entities different than the trailer owner. Federal regulators had suggested that such split ownership could reduce incentives to adopt such equipment. Using a unique data set to account for the endogeneity of vehicle attributes, Leard, Linn and Zhou evaluate the welfare consequences of these changes by estimating consumer valuation of higher fuel economy and foregone performance. Ku and colleagues use 13 years of data on 54 new hybrid models that have a similar gasoline comparator, to estimate a model of total cost of ownership. They summarize the financial implications in the consumer payback period, which may be smaller or larger than the average longevity of the vehicle and discuss implications for rational choice theory, risk aversion, and behavioral economics.



T3-A.1  1:30 pm  Assessing the Energy Paradox in Reasonably Competitive Markets: New Evidence from Heavy Duty Trucking. Fraas A*, Lutter R, Wietelman D, Porter Z, Wallace A; Resources for the Future    lutter@rff.org

Abstract: The EPA and the DOT recently issued a final rule mandating that heavy-duty trucks meet certain new fuel efficiency standards. The supporting economic analysis concluded that the fuel savings to truckers would greatly exceed the costs of acquiring the new technology, implicitly raising questions about the efficiency of seemingly competitive markets. The economic analysis also suggested that one reason for this result could be that owners of trailers would incur the costs of some of the fuel efficient devices, while owners of tractors, who are often independent entities, would enjoy the savings. This paper analyses new data from 2015 to 2017 to test the association between split ownership and use of fuel efficient devices in a model that also controls for a variety of characteristics of the firm owning the tractor and the market where it operates.

T3-A.2  1:50 pm  Assessing the Risk of Product Failure in Regulatory Analysis: Case Studies from Energy Efficiency Lawsuits. Fraas AG, Miller SE*; George Washington University   sofiemiller@gwu.edu

Abstract: Federal regulation in the energy, environmental, and product safety areas often requires the adoption of new technologies. However, incorporation of a new technology in products is not without risks, as evidenced by several examples of notable product failures (e.g., Whirlpool clothes washers and Subaru engines). In such cases, the costs and benefits to consumers may vary significantly from initial agency estimates. This presentation includes several case studies of products that are regulated for energy efficiency and discusses 1) regulatory agency treatment of the risk of resulting product failures, 2) the nature of identified product failures, and 3) the effectiveness of market and legal institutional responses to these problems. Ex post responses include manufacturer warranties, market information channels like Consumer Reports, and legal remedies like class action lawsuits. Finally, we consider the extent to which the risk of potential product failures deserves further consideration in the rulemaking process and in prospective benefit-cost analyses.

T3-A.3  2:10 pm  How Much Do New Vehicle Consumers Value Fuel Economy and Performance? Evidence from Technology Adoption. Leard B, Linn J*, Zhou YC; Resources for the Future   linn@rff.org

Abstract: The recent literature has shown that tighter passenger vehicle fuel economy standards cause manufacturers to trade off vehicle performance for fuel economy. This paper is the first to evaluate the welfare consequences of these changes by estimating consumer valuation of higher fuel economy and foregone performance. Using a unique data set and novel statistical techniques to account for the endogeneity of vehicle attributes, we estimate the welfare cost of foregone performance to be approximately equal to expected fuel savings benefits. Therefore, the recently tightened standards have had approximately zero net effect on private consumer welfare, contrasting with the analysis by the US regulatory agencies that does not include lower performance and suggests large consumer benefits.

T3-A.4  2:30 pm  Are Auto Consumers Rational about Conventional Hybrids? Graham JD*, Julian AA, Kin Lu A, Duncan D, Siddiki S, Carley S; Indiana University   grahamjd@indiana.edu

Abstract: Despite major engineering investments in vehicles similar to the Toyota Prius, few consumers decide to purchase hybrids. This paper explores consumer purchasing decisions about conventional hybrid-electric vehicles to determine whether consumer decision making is consistent with the energy paradox. Using 2004-2017 data on 54 new hybrid models that have a similar gasoline comparator, the authors estimate a total cost of ownership model that accounts for vehicle price, applicable federal tax credits, interest rate on car loan, fuel price, rated fuel economy, vehicle miles of travel, vehicle survival rates and other factors. Ancillary information is also assembled on performance, cargo space, and upgrade packages offered on standard hybrid and gasoline models. The financial aspects are summarized in the consumer payback period, which may be smaller or larger than the average longevity of the vehicle. Implications for rational choice theory, risk aversion, and behavioral economics are discussed.



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