We estimate a model of vehicle choice and miles driven to analyze the impact of fuel conservation policies in the Indian car market. Taxing diesel fuel to equalize diesel and petrol prices would reduce fuel consumption in the new car market by 7 percent and reduce diesel car sales by 26 percent....

The relationship between gasoline prices and the demand for vehicle fuel efficiency is important for environmental policy but poorly understood in the academic literature. We provide empirical evidence that automobile manufacturers price as if consumers respond to gasoline prices. We derive a...