Imperfect Mileage Information and Changing Utility: A Model and Survey Results

This paper extends work which integrates misinformation into consumer utility theory. It provides a framework for measuring the cost of misinformation or the value of improved information. If automobile purchases are based on imperfect gasoline mileage information, a discrepancy results between consumers' expected and actual fuel expenditures. Based on a survey of new car buyers, the empirical analysis yields estimates of the private and social cost of inaccuracies in automobile buyers' pre‐purchase gasoline mileage estimates. The reliability of mileage information varied from different sources, but many consumers found the EPA fuel‐economy ratings relatively unreliable.