A mixed logit model of U.K. household demand for alternative-fuel vehicles.

Abstract

Concerns regarding the environmental impacts of petrol and diesel cars have stimulated the development of vehicle technologies based on alternative fuels. In contrast to the scientific research which has led to these significant technological developments, there has been a relative paucity of published academic research on the demand from consumers for such vehicles, and this small literature has been almost entirely US-based. This paper, which reports work funded by the UK Economic and Social Research Council, represents the first study of its kind in the UK. Two stated preference experiments based on households' purchase choices between conventional vehicles and alternative-fuel vehicles were conducted. The data were analysed using various state-of-the-art formulations of logit models including error components logit and random parameters logit. Elasticities derived from the preferred models show that demand for alternative-fuel vehicles is much more sensitive to purchase price than demand for conventional vehicles, although the operating cost elasticities are more in line with existing evidence. It is concluded that alternative-fuel vehicles are unlikely to achieve a significant market share without non-marginal technological and/ or legislative/ fiscal developments to encourage their take-up. (A)