A derived demand model of regional highway diesel fuel use

A regional, econometric model of heavy truck diesel fuel use is derived based on the theory of production. Input demand functions for new trucks and diesel fuel are specified and estimated. A simple, logistic scrappage model is estimated and used to estimate total heavy truck stocks and diesel-engine heavy truck stocks. Demand equations based on the AIDS almost ideal demand system flexible form cost function are estimated for new heavy truck demand and regional highway diesel fuel demand. New heavy truck demand is found to be elastic with respect to GNP, inelastic with respect to own price, and appears extremely sensitive to short term GNP trends. The short run price elasticity of diesel fuel demand is found to be very small.