Disaggregate Analysis of the Demand for Gasoline.

In this paper, we adopt a disaggregate approach to modeling the components of gasoline demand. Gasoline demand in our model is viewed as the outcome of the following household decisions: vehicle holdings (number and type) and vehicle usage (nondiscretionary and discretionary usage). Modeling gasoline demand in this way correctly specifies gasoline as an input into the production of transportation services and allows for the interdependence between household decisions on vehicle holdings and usage. Moreover, estimation of the components of gasoline demand allows policymakers to identify the means by which individuals will respond to policy changes. This leads to more effective policies designed to reduce gasoline consumption. We use this model to estimate price and fuel efficiency elasticities of vehicle usage and gasoline demand.