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Alex Granados

Duke University
The Fuqua School of Business
100 Fuqua Drive
P.O. Box 90120
Durham, NC 27708-0125

Tel +1.919.660.7801

alexander.granados@duke.edu

Erin Medlyn

Duke University
The Fuqua School of Business
100 Fuqua Drive
P.O. Box 90120
Durham, NC 27708-0125

Tel +1.919.660.8090

erin.medlyn@duke.edu

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Change in Labels Could Increase Interest in Fuel Efficiency

Researchers suggest simple way to encourage consumers to buy fuel-efficient vehicles

May 14, 2014

DURHAM, N.C. -- More people would buy energy-efficient vehicles if auto dealers included long-term gasoline costs on fuel-efficiency labels, according to research from Duke University's Fuqua School of Business.

Management professor Rick Larrick and Fuqua post-doctoral associate Adrian Camilleri found that showing consumers the cost of gasoline over the approximate lifetime of the vehicle (100,000 miles) encourages consumers to buy vehicles that pollute less.
 
"Giving the gas cost over the lifetime of the vehicle seems to give people a better understanding of its fuel efficiency," Larrick said. "The current metrics used don't help people to understand the true value of a fuel-efficient vehicle."

The findings, reported in a paper titled "Metric and Scale Design as Choice Architecture Tools," are published in the Spring issue of the Journal of Public Policy & Marketing.

Currently, gasoline use is reported in a few different ways on the U.S. Environmental Protection Agency vehicle labels that you see when you buy a vehicle: one of them is the number of gallons used per 100 miles, and another is the cost of gasoline over the average annual distance driven (15,000 miles).

Larrick and Camilleri conducted two experiments to gauge consumer reactions to these and other kinds of metrics that expressed fuel economy.

In both experiments, they gave more than 400 U.S. participants two vehicles to choose from -- a cheaper, less fuel-efficient model and a more expensive fuel-efficient vehicle.

The researchers labeled the vehicles in six different ways -- gallons of gas used per 100 miles, 15,000 miles or 100,000 miles, or the cost of gas over the same distances.

In the first experiment, the higher cost of the fuel-efficient vehicle was offset by the gasoline cost savings. In this experiment, the participants were more likely to pick the fuel-efficient vehicle when fuel economy was expressed as the cost of gas over 100,000 miles.

In the second experiment, the researchers used the same metrics, but the cost of the fuel-efficient vehicle was not offset by the savings in gasoline cost. Although interest in the fuel-efficient vehicle decreased, the participants still showed the strongest preference for the fuel-efficient vehicle when fuel economy was expressed as the cost of gasoline over 100,000 miles.

"Consumers place a lot more weight on fuel efficiency when this information is given to them in terms of gas cost over 100,000 miles," Camilleri said. "The amazing thing is that this greater weight persists even when the efficient vehicle doesn't necessarily pay for itself in savings, which makes sense for the consumer who also cares about the environment." 

Larrick said this research shows how an easy change to fuel economy labels could increase the purchase of fuel-efficient vehicles.

"Given concerns about the contribution of vehicle emissions to climate change, policymakers should consider which metrics encourage consumers to purchase fuel-efficient vehicles," Larrick said. "This research identifies one metric that would be useful on fuel economy labels."

Larrick's 2008 research with Fuqua associate professor Jack Soll, "The MPG Illusion," suggested that using the measure of gallons per mile was a better way to think about fuel consumption than miles per gallon. In 2013, the EPA added "gallons per 100 miles" to its fuel economy labels. 

The researchers developed this calculator that helps consumers determine gas use and cost for different rates of miles per gallon.

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This research was supported by NSF grant SES 0951516 to the Center for Research on Environmental Decisions.