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Consumer value of fuel choice flexibility: a case study of the flex-fuel car in Sweden
Centre of Transport Studies, Stockholm, Sweden; Swedish National Road and Transport Research Institute, Linköping, Sweden; TRENoP, Royal Institute of Technology, Stockholm, Sweden .
Department of Economics, Karlstad University, Karlstad, Sweden.
2013 (English)In: European Transport Research Review, ISSN 1867-0717, E-ISSN 1866-8887, Vol. 5, no 4, p. 207-215Article in journal (Refereed) Published
Abstract [en]

Purpose: This paper examines the value of fuel choice flexibility derived from a flex-fuel engine.

Method: Based on the stochastic properties of fuel prices, we use Monte-Carlo simulation in order to value the option to switch fuel.

Results: Our findings indicate a considerable value of fuel choice flexibility, ranging between 7,500 and 37,800 SEK, depending on the underlying stochastic process we assume that fuel prices follow. This can be compared to the state subsidy of 10,000 SEK provided until recently for buying a flex-fuel car.

Conclusion: Compared to an environmentally friendly pure ethanol strategy, the switching strategy is considerably less costly, about 2,000-19,000 SEK depending on the assumed underlying stochastic process, a fact that is important to take into consideration with environmental policy.

Place, publisher, year, edition, pages
Heidelberg, Germany: Springer, 2013. Vol. 5, no 4, p. 207-215
Keywords [en]
Flex-fuel car, Geometric Brownian motion, Mean-reversion, Real option analysis
National Category
Engineering and Technology Economics and Business
Identifiers
URN: urn:nbn:se:oru:diva-44275DOI: 10.1007/s12544-013-0104-2ISI: 000209728300004Scopus ID: 2-s2.0-84886785754OAI: oai:DiVA.org:oru-44275DiVA, id: diva2:805223
Available from: 2015-04-14 Created: 2015-04-14 Last updated: 2017-12-04Bibliographically approved

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More styles
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  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
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  • asciidoc
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