What do one hundred million transactions tell us about demand elasticity of gasoline?

Mohammad Hossein Rahmati, Amirhossein Tavakoli and Mohammad Vesal

MPRA Paper from University Library of Munich, Germany

Abstract: The price elasticity of gasoline demand is a key parameter in evaluation of various policy options. However, most of the literature uses aggregate data to identify this elasticity. Temporal and spatial aggregation make elasticity estimates unreliable. We employ a unique dataset of all gasoline transactions in Iran during a four-month period around an unexpected exogenous price change to identify price elasticity. After controlling for date and individual fixed effects we estimate a robust significant price elasticity of -0.077. Aggregation of the same data by week, month, and city yields an estimate of -0.3 indicating a significant bias in earlier studies. We also identify a significant withholding behavior by consumers in response to anticipated price changes.

Keywords: Gasoline demand elasticity; Transaction-level data; Withholding behavior; Subsidy (search for similar items in EconPapers)
JEL-codes: C55 D12 Q31 (search for similar items in EconPapers)
Date: 2019-03
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Related works:
Journal Article: What do one hundred million transactions tell us about demand elasticity of gasoline? (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:97858

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