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Product quality, product price, and share dynamics in the German compact car market

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  • Uwe Cantner
  • Jens J. Krüger
  • René Söllner

Abstract

The present article examines one of the central elements of evolutionary thinking--competition formalized by the replicator dynamics mechanism. Using data on product characteristics of automobiles sold on the German domestic market over the period 2001--2006, we construct a competitiveness or fitness indicator for each car model applying non-parametric efficiency measurement techniques. The basic question we intend to answer is whether cars providing a higher quality--price ratio for consumers tend to increase their market share compared to variants with lower quality--price ratios. The relationship between a car models' fitness and its market performance is empirically tested in a regression framework. The results show that the principle of "growth of the fitter" is working as suggested by evolutionary theory. In particular, we find that car models with considerably lower fitness than the market average lose additional market shares, whereas models with above-average fitness gain additional market shares. Copyright 2012 The Author 2012. Published by Oxford University Press on behalf of Associazione ICC. All rights reserved., Oxford University Press.

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Bibliographic Info

Article provided by Oxford University Press in its journal Industrial and Corporate Change.

Volume (Year): 21 (2012)
Issue (Month): 5 (October)
Pages: 1085-1115

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Handle: RePEc:oup:indcch:v:21:y:2012:i:5:p:1085-1115

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Cited by:
  1. van der Vooren, A. & Alkemade, F. & Hekkert, M.P., 2013. "Environmental performance and firm strategies in the dutch automotive sector," Transportation Research Part A: Policy and Practice, Elsevier, vol. 54(C), pages 111-126.
  2. Jan-Dirk Schmöcker & Tsuyoshi Hatori & David Watling, 2014. "Dynamic process model of mass effects on travel demand," Transportation, Springer, vol. 41(2), pages 279-304, March.
  3. Kaldasch, Joachim, 2014. "Evolutionary Model of Moore’s Law," MPRA Paper 54397, University Library of Munich, Germany.

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