Korean Energy Economic Review ISSN:1599-7057(Print) 에너지경제연구

Gasoline is consumed to finally drive a vehicle as input. In other words, consumers are satisfied with final distance they drive using gasoline instead of with gasoline consumption itself. Thus, a choice of vehicle affects their gasoline demand, which could cause an endogenous bias in an estimation of gasoline demand. Using Korea Energy Consumption Survey, this study estimated the probabilities in which a specific vehicle a driver owns would be chosen. Then, using the estimated probabilities, we estimate Vehicle Miles Travelled(VMT) demand, adjusting with a correction term. As a result, we find that VMT demand of Korean consumer is interrelated with their vehicle choices, which means a simple OLS without any correction term overestimates the price elasticity of VMT demand or gasoline demand.