US HYBRID VEHICLE DEMAND
Transportation, as is evident from the various research and studies that have been gathered in this paper, is one of the most significant contributors to the steady increasing rise in problems in the environment ADDIN ZOTERO_ITEM sorttrue,citationItemsitemID276 (Heald et al., 2003). Environmentalists and environmental economists have continuously pointed out that the problem of greenhouse emissions from transportation -- either in the public or private field -- is an issue that must be addressed the soonest time possible.
As a result, over the past few years, because of certain economic trends that have popularized this issue, consumers, public policy makers, and even private firms have reacted to such modern issues through the creation, implementation, and distribution of hybrid vehicles. Interestingly enough, as with any action that has to do with various interactions of the market, economics and the various disciplines that fall under it have a significant contribution to the study of hybrid vehicles in the United States. Specifically, because the research paper is approaching the problem from a democratic and free market approach, the issue of the factors affecting the demand for such hybrid vehicles became an important study which would be able to generate other implications and future actions both for consumers and private enterprises of such action. This paper would therefore revolve around the concept of the demand for hybrid vehicles in the United States -- both in theory and in application -- and be able to generate a conclusion that would be suitable to the problem that has been addressed.
As with any properly constructed research in the field of economics -- and in that case any scientific field -- the first order of business is to identify the problem of the research. For this specific study, the problem would be what our various factors affecting the demand of hybrid vehicles in the United States. This general problem, although broad, captures not only the analytical concepts that would be used in the paper but also the various specific approaches and steps in order to arrive at a solution and conclusion of this report.
First, it would be the task of this paper to able to highlight the objectives, significance, and theoretical methods that would be used to answer the question. After it has done so, it would proceed by providing an extensive literature review on the various significant factors that would be important in the methodology and the analysis. After the said literature review, the paper would proceed to the actual methodology of the report that highlights how the research problem and the various objectives would be answered and achieved respectively. In order to do this, the paper would be using both qualitative and quantitative techniques of analysis.
The last section of this paper would be to provide the various results and implications of the various data that had been gathered as well as the accompanying analysis that has been made. Following it would be a conclusion and a summary of the various important points that has been generated by the research.The objective of this paper is to be able to identify the various critical variables that would significantly affect the demand of hybrid vehicles in the United States. Also, another objective is to have a complete an exhaustive discussion on the subject from the point of view of economics and the relevant science is involved that would eventually come up in such discussions. As has already been pointed out earlier in the beginning of the research, the study could be pointed out to be extremely significant because of the fact that various modern social variables such as environmental awareness, cost implications of fossil fuels, and a host of other factors has led to development of hybrid vehicles. Its distribution has been hailed in many countries -- specifically developed countries and economies -- around the world today but is significantly recognize in the United States because of its ability to produce and manufactures such vehicles, as well as the indicated desire by consumers to carry out individual production functions in a socially and environmentally aware manner while at the same time still follow utility maximization theories and minimization of costs -- factors that would be discussed extensively in the literature review section of this research.
However, it is here where we must point out the essential approach which is the theoretical and analytical framework that would be used. From an analysis point of view, because it is the factor of demand, the framework that would be used is the willingness to pay of consumers in the economy for such hybrid vehicles. In the study of economics, demand is basically captured by the two-dimensional willingness to pay locus of points which is then created by the various variables affecting it. This theoretical framework, although can only be used in a partial equilibrium setup of the perfectly competitive market economy, would nevertheless be an important aspect of the present and future research -- as well as answering our questions -- because it would be able to identify through qualitative and quantitative means significant factors that affect such demand. Other frameworks in other science disciplines in measuring demand make use of non-parametric tools of estimation. Although such methods could also provide valuable insight, we would be limiting this study to demand from the point of view of economic estimation because it is the issue that we would like to address in the research. This theoretical framework of demand side economics through willingness to pay estimation of variable significance, as would be seen, has been used in a number of other products and services in the past and present and would be a reliable methodology to highlight.
Literature on the subject reflects that in the United States, one of the most significant economic issues that are faced by regular consumers today are the prices of transportation derivatives such as fuel prices and oil. In fact, such sources have pointed out that this issue does not only come from certain population demographics that own private vehicles, but also from the public sphere as well because transportation costs are significantly affected -- in fact first and foremost affected -- by such fossil fuels and gas prices. In a study that was published in 2001, it has been indicated that in the United States, although greenhouse gases as well as sustainability of agriculture and forestry playing important environmental rules on the public opinion, there is still the tendency of the general consumer population to go back to cost reduction in day-to-day expenses -- going back to gas prices and transportation costs ADDIN ZOTERO_ITEM sorttrue,citationItemsitemID15406 (McCarl Schneider, 2001). In another study that was published in 2005, furthermore, authors have reviewed the possibility of making use of such negative externality in order to boost of government revenues and make government responsible for the correction of such externalities and problems through the proposed gasoline tax ADDIN ZOTERO_ITEM sorttrue,citationItemsitemID8173 (Parry K. A. Small, 2005). However, even though there have been high willingness to pay of consumers for such taxation and externality direction by the government, there were also accompanying problems with the proposed solution such as the problem of other states not having a high enough willingness to pay for such corrective measures and even problems relating to the mistrust of other sectors of the population is not allocate indirect amount of correction enough for cost implications for the end consumer ADDIN ZOTERO_ITEM sorttrue,citationItemsitemID8173,position2 (Parry K. A. Small, 2005).
As a result for such indicated problems, together with modern innovations in fuel economy as well as the various incentives that have been promoted to researchers regarding the development of the close that would not only be environmentally safe and productive but also efficient from the cost perspective of the general public, hybrid vehicles have been developed both by public and private researchers -- researchers at usually belong to automotive manufacturers -- to continue such development projects. As early as 1997, a research article had been published on the various systematic designs of electric and hybrid vehicles that could be probably use in todays modern organized economy ADDIN ZOTERO_ITEM sorttrue,citationItemsitemID10128 (Ehsani, Rahman, Toliyat, 1997). Although this paper would not anymore preferred to delve into highly technical details, it would at least be useful for the researcher and the reader to understand that there have been many problems that have been encountered by scientists developing the said new technology from the standpoint of the necessary costs required not only to produce them but also for consumers to maintain them ADDIN ZOTERO_ITEM sorttrue,citationItemsitemID2344 (Schouten, Salman, Kheir, 2002). As a result, there is also extensive literature that has been uncovered on the subject of individual agencies -- both interested in profit maximization and in the public good -- creating various economic projections and models on the sustainability, profitability, and cost implications of hybrid vehicle use in the United States. Any study that was published as early as 1999, various researchers had tried to simulate the use of electric and hybrid vehicles on various configuration possibilities in order to make it cost efficient. However, again, the problems that the researchers had eventually met is that because of the high expense that is required not only to purchase the Beatles as a form of overhead cost but also in the day-to-day maintenance of running those vehicles as a form of variable cost, consumers would probably not be willing to pay for the purchasing and even operation of such vehicles ADDIN ZOTERO_ITEM sorttrue,citationItemsitemID14323 (Rizzoni, Guzzella, Baumann, 1999).
However, one must remember that technological advancement and improvement -- even in the realm of transportation and not only in consumer electronics -- follows a geometric rate of growth and progression associated to the Moores Law of the doubling of technological growth every few months. As opposed to other literature indicated above the high inefficiency of electric and hybrid vehicles in the United States, modern literature has pointed out that because of developments in the technology, it is now equally competitive to purchase and operate such hybrid vehicles at the same -- or even sometimes significantly lower prices -- as traditional vehicles ADDIN ZOTERO_ITEM sorttrue,citationItemsitemID9867 (Ehsani, Emadi, Gao, 2009). Although it has been proven that systems that run completely on electricity may largely be inefficient to the general public because a number of other factors pointed out by accompanying literature, a hybrid solution would be efficient because of the modern energy management systems as these vehicles that would be able to balance fuel economy and energy use ADDIN ZOTERO_ITEM sorttrue,citationItemsitemID9222 (Moreno, Ortzar, Dixon, 2006).
From the point of view of economic theory, when such a technology exists and finally enters the market -- a kind of technology that is more efficient not only from an environmental perspective but also from a cost perspective -- then such economic models claim that consumers would of course absolutely shift to such new technology. However, researchers on the subject have pointed out that this is not the case and there are still factors affecting both the level of demand and the elasticity of demand of consumers for such hybrid cars in the United States ADDIN ZOTERO_ITEM sorttrue,citationItemsitemID117 (Higgins, Matthews, Hendrickson, M. J. Small, 2007). In fact, other researchers have already made use of a methodology where in the dominant variable of gasoline crisis in the modern age, even though it is still high as compared to electric vehicle and hybrid vehicle consumption, had been applied and discovered that this was not the only factor affecting the demand for such vehicles in the United States -- although as we would discover later it is a significant variable indeed ADDIN ZOTERO_ITEM sorttrue,citationItemsitemID5535 (Beresteanu Li, 2008). There are many other various literature available on the subject. However, for the sake of brevity, these are the essential ones that have been uncovered by the research and would aid greatly in the development of both the methodology as well as the analysis of the problem in order to meet the objective.
The hypothesis that would be offered by the research, because it is mainly in economics and statistical problem, is that whether or not various indicated variables have a significant effect on the demand of hybrid vehicles in the United States today. This is the only hypothesis that would be used in the research. However, remembering that by saying various variables, theyre actually many hypothesis that must be tested. Statistical techniques on the subject would be discussed later. However, for now, it would be wise for the research to indicate the hypothesized variables for statistical testing before the actual methodology is introduced.
Gasoline price is the first variable that must be taken into consideration. In economic theory, substitute goods would significantly affect the demand of a product. This is represented by either an upward or downward shift of the theoretical demand curve. Gasoline would be able to shift the demand curve of hybrid cars upwards if the price of gasoline is high, and shift the demand curve downward -- at least in theory, something that the statistical test would use.
Price of these vehicles -- both overhead and variable -- would be another variable that would be taken into consideration in hypothesis testing. If the prices of either the overhead or purchasing costs of these vehicles are too high, or if the price to maintain it is too high, then it would also shift the demand of these vehicles downward. The same would be true to the contrary. However, such a relationship would also be tested more rigorously because there could be an instance where the price of the overhead cost for these vehicles would be high but the maintenance costs are low -- such is the modern case of modern hybrid vehicles. The same intuition could also be used to the contrary.
A third important variable would be personal preferences. Although price and other market factors are powerful influencers of demand, personal preference and a utility that individuals and markets could be able to derive the consumption of these vehicles would also theoretically significantly affect the demand for vehicles in the hybrid category.
The main statistical tools and methods that have been used by economists in order to highlight the relationship and significance of variables are the correlation and regression analysis and techniques. A correlation analysis could be able to either prove or falsify the hypothesis indicated above that each of the three variables are significant elements affecting the demand for hybrid vehicles. Although the mathematical model for correlation would not anymore be included in this research -- there are many other references in literature available on the specified methodology in its simplest form -- we could at least point out that such a method could easily be achieved by making use of statistical packages as long as there is data available on the three variables that have been indicated above. Together with recent or future data on the propensity of consumers that by modern hybrid vehicles, the study would be able to generate the set date of relationship and variable. Through the statistical technique, the research may be able to prove the significance of the variables in affecting demand.
Although not related to answering the problem and objective of the study, it would at least be interesting to note that a regression analysis as an additional tool for correlation may be able to predict the actual effect on demand when individual variables change. Again, a regression methodology is fairly simple and available in various literature on the subject. Basically, what their aggression analysis would do is to highlight a best fit the line across the data samples and correlation of the variables highlighted above -- together with the data of actual sales of hybrid vehicles today -- and generates a statistical result.
However, analyzing the factors that affect demand would only be an initial step of the research process. After the researcher has been able to highlight significant variables and underlined there is a true direct economic relationship between the hypothesized variables and the results of the demand for hybrid vehicles, then the eventual implication of the actual application of these estimates must then be questioned and be brought into the table.
Perhaps the single most essential application of this research and the evidence gathered is that of forecasting the future of the demand of hybrid vehicles. Fortunately for the study, there have already been other studies that have been made by other researchers which has actually followed the methodology indicated above -- of course including and removing some variables depending on the research question that each researcher has it forward. However, there is a common conclusion that could be found from all the research and literature gathered on the subject -- that gasoline prices, among all the other variables, is the most significant predictor of the demand for hybrid vehicles in the United States. Although the other variables of consumer preference and the price of hybrid vehicles have been pointed out to be statistically significant, there is a large scale of difference between the significance of these variables and the significance of gasoline prices. The statistical tests have shown that although there could be perhaps a 10 to 20 increase on present and future demand of hybrid vehicles if the preferences for these vehicles and the prices of these vehicles go down, there is a basic agreement between researchers that as much as 80 of the propensity and willingness to pay of consumers for these hybrid vehicles increase depending on the movements of gasoline prices. Again, we reiterate the fact that studies have already been made on variable estimation on the same problem that has been identified earlier on the research. Gasoline prices, it seems, is the most statistically significant and relevant variable both from the perspective of economic correlation and predictive regression.
What, then, because of the numerical evidence and qualitative evidence that we have gathered in the literature review, would be the implications of such findings on the future of the demand for hybrid vehicles in the United States
Remember that although traditional economic, business, and statistical analysis would probably answer that the demand of hybrid cars in the future and the forecasting of the future markets for such vehicles would probably depend solely on the variables that have been proven and indicated by their research. However, one must also remember that especially in modern economics and associated analysis of modern methods, the operations of a certain market -- in this case hybrid vehicles in the United States -- does not necessarily occur in a vacuum. There are other factors that must be taken into consideration. These factors, when analyzed, also have specific market and all its implications for the United States.
For example, even though gas prices has been pointed out to be the major significant variable in determining the future of the market of hybrid vehicles, it is nevertheless be recognized that many of todays politicians in the United States are backed up by campaign money by large multinational petroleum companies.
Discoverers and producers of hybrid vehicles are still small scale not only with respect to profit but also with respect to political scope and power and this could also be a significant factor in determining demand of the future markets of hybrid vehicles. In the long run, even if there has been extensive proof of the consumer welfare benefits that may be given by shifting to hybrid vehicles, if such companies do not yet reach economies of scale to be large corporations enough to influence political decision-making in the United States complicated political arena, then it would not have any hope against the various legislations of policymakers regarding the laws surrounding transportation. Furthermore, institutional analysis that is recently being undertaken by modern economists in understanding the operations of the modern market has pointed out that long-standing monopolies -- specifically petroleum companies -- do not only control the market through the political sphere but also through other partner organizations that have significant effect in society as well such as mass media, religion, and social institutions.
So, in forecasting the future demand of hybrid vehicles in the United States, another factor that must be taken into consideration is the ability of producers to sustain long-run profitability for these vehicles. Long-run profitability, from an economic standpoint, requires that there are large numbers of producers and sellers in the market. Because of recent issues on patterning and rights Association, manufacturers of hybrid vehicles are actually destroying their own future and markets by not allowing other organizations to develop and improve upon the technology that may have integrated into their vehicles.
And yet another factor that must be integrated into the analysis of forecasting the market for these vehicles is that there are yet other substitute goods that are being developed by the automotive industry and even small and medium enterprises that invest on other relative goods such as those of natural gas propulsion.
Even factors of public transportation of making use of light rail transit could also play a role in the future of hybrid vehicles in the United States.
Therefore, in all the research and evidence that has been gathered, it might at first seem to be extremely difficult to provide an overall conclusion on the forecast of the market. On one side, using statistical and economic methods such as the one used above in the identification and analysis of the variables, there seems to be an assurance that gas prices, when reaching significantly higher levels, would eventually result in consumers shifting to hybrid vehicles. However, it must be noted that gas prices are ready excessive especially in the United States and therefore raises the question of the other problems and variables that may not have been indicated in the traditional associated variables relating to hybrid vehicles in the country. The research may at least say that from a purely economic standpoint, crisis of substitutes would be the most significant of the three. However, it must also highlight the importance of understanding the political economy of the country to be another factor that must be taken into consideration by other research. This conclusion, although satisfactory at lease from a single perspective, would at least provide avenue for future research on the subject because it would allow researchers to integrate yet other variables that have not been traditionally made use in economics in approaching the demand of hybrid vehicles in the United States. In fact, recent developments on institutional methodology are already being made by institutional economists today in trying to integrate a game theory approach on the probability of legislation -- or in this case and scenario a specific market good -- to go through not only regulatory process but also the various social and political hurdles that it may encounter in computing for demand. This future research may indeed be valuable to contribute on the literature of the demand for hybrid vehicles in the United States
To conclude, the research has highlighted that hybrid vehicles in the United States is a possible market that could find improvement in the future especially considering the fact that there are many recent environmental variables that social groups, markets, governments, and even individuals are experiencing increasing awareness. The literature that has been made use in this paper has indicated that even though fast applications of hybrid vehicle technology would be largely inefficient for consumers, modern derivatives of the technology can be beneficial. Statistical tests that have been done by other research, also apply to this research, has pointed out that although there are many significant variables affecting the demand of hybrid vehicles in the United States, the most significant one is the prices of gasoline in the country. As a result, this would imply that in the long run, it is the crisis of petroleum and gasoline which will eventually dictate the future of the market of hybrid vehicles through addressing the market from the point of the demand.
However, the paper also extensively discusses the important issue that such a statistical model and the revelation of the significance of this statistical variable is not the only necessarily important factor especially from an economic and social political perspective. Recent methodologies in economics has pointed out that there are yet other significant market interactions that have traditionally been ignored by statistical analysts and economists but are nevertheless essential given the heavy literature and proof of burden of these second-generation effects.
Future avenues of research may include these variables in estimating the demand curves of hybrid vehicles. However, in this specific research, although the question and problem that has been pointed out above has already been resolved, it is nevertheless also important to indicate avenues of discrepancy and problems in the data set future methodologies may be able to solve.