Is Vehicle Depreciation a Component of Marginal Travel Cost? A Literature Review and Empirical Analysis

A review of 116 travel cost models finds that, of the studies that report their practice, about half include depreciation in their calculation of vehicle costs and half do not, with none giving a justification for either approach. We examine empirically whether depreciation is related to households’ decisions of how much to drive. Using a sample of over 200,000 US households, we find that, relative to fuel costs, depreciation has a small effect on the amount that households drive. This finding is consistent with households’ considering depreciation as primarily a fixed rather than marginal cost. Final version: October 2015 1 Journal of Transport Economics and Policy, Volume 50, Part 2, May 2016