Hedging creates value only when the policy is near optimal but can be harmful otherwise. This paper takes the US airline industry as an example and derives the optimal fuel cost hedging ratio as a function of firm-specific revenue and cost sensitivities, as well as the relative composition of...

To what extent do car buyers undervalue future fuel costs, and what does this imply for the effectiveness of alternative tax policies? To address both questions, we show it is crucial to account for consumer heterogeneity in mileage and other dimensions. We use detailed product-level data for a...

This paper uses a unique data set of monthly new vehicle sales by detailed model from 1978-2007, and implements a new identification strategy to estimate the effect of the price of gasoline on consumer demand for fuel economy. We control for unobserved vehicle and consumer characteristics by...