Portfolio Considerations in Differentiated Product Purchases: An Application to the Japanese Automobile Market
AbstractConsumers often purchase more than one differentiated product, assembling a portfolio, which might potentially affect substitution patterns of demand and, as a consequence, oligopolistic firms’ pricing strategies. This paper studies such consumers’ portfolio considerations by developing a structural model that allows for flexible complementarities/substitutabilities depending on consumer attributes and product characteristics. I estimate the model using Japanese household-level data on automobile purchasing decisions. My estimates suggest that complementarities arise when households purchase a combination of one small automobile and one minivan as their portfolio. Ignoring such effects leads to a overstated counterfactual analysis. Simulation results suggest that a policy proposal of repealing the current tax subsidies for small ecofriendly automobiles would decrease the demand for those automobiles by 9%; less than the 14% drop predicted by a standard single discrete choice model.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Bank of Canada in its series Working Papers with number 11-27.
Length: 46 pages
Date of creation: 2011
Date of revision:
Contact details of provider:
Postal: 234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada
Phone: 613 782-8845
Fax: 613 782-8874
Web page: http://www.bank-banque-canada.ca/
Economic models; Market structure and pricing;
Find related papers by JEL classification:
- D4 - Microeconomics - - Market Structure and Pricing
- L5 - Industrial Organization - - Regulation and Industrial Policy
- Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-12-19 (All new papers)
- NEP-COM-2011-12-19 (Industrial Competition)
- NEP-MKT-2011-12-19 (Marketing)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Pasquale Schiraldi, 2010.
"Automobile Replacement: A DynamicStructural Approach,"
STICERD - Economics of Industry Papers
49, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
- Pasquale Schiraldi, 2011. "Automobile replacement: a dynamic structural approach," RAND Journal of Economics, RAND Corporation, vol. 42(2), pages 266-291, 06.
- Chen, Jiawei & Esteban, Susanna & Shum, Matthew, 2010. "Do sales tax credits stimulate the automobile market?," International Journal of Industrial Organization, Elsevier, vol. 28(4), pages 397-402, July.
- Jerome Adda & Russell Cooper, 1997.
"Balladurette and Juppette: A Discrete Analysis of Scrapping Subsidies,"
0076, Boston University - Industry Studies Programme.
- Jerome Adda & Russell Cooper, 2000. "Balladurette and Juppette: A Discrete Analysis of Scrapping Subsidies," Journal of Political Economy, University of Chicago Press, vol. 108(4), pages 778-806, August.
- Jerome Adda & Russell Cooper, 1997. "Balladurette and Juppette: A Discrete Analysis of Scrapping Subsidies," NBER Working Papers 6048, National Bureau of Economic Research, Inc.
- Adda, Jérôme & Cooper, Russell W., 1997. "Balladurette and jupette: a discrete analysis of scrapping subsidies," CEPREMAP Working Papers (Couverture Orange) 9711, CEPREMAP.
- Adda, JC, 2000. "Balladurette and Juppette: A discrete analysis of scrapping subsidies," Open Access publications from University College London http://discovery.ucl.ac.u, University College London.
- Antonio M. Bento & Lawrence H. Goulder & Mark R. Jacobsen & Roger H. von Haefen, 2009.
"Distributional and Efficiency Impacts of Increased US Gasoline Taxes,"
American Economic Review,
American Economic Association, vol. 99(3), pages 667-99, June.
- Bento, Antonio M. & Goulder, Lawrence H. & Jacobsen, Mark R. & von Haefen, Roger H., 2007. "Distributional and Efficiency Impacts of Increased U.S. Gasoline Taxes," Working Papers 127021, Cornell University, Department of Applied Economics and Management.
- Michelle Sovinsky Goeree, 2005. "Advertising in the US Personal Computer Industry," Industrial Organization 0503002, EconWPA.
- Robert W. Hahn, 1995. "An Economic Analysis of Scrappage," RAND Journal of Economics, The RAND Corporation, vol. 26(2), pages 222-242, Summer.
- West, Sarah E., 2004. "Distributional effects of alternative vehicle pollution control policies," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 735-757, March.
- Angelique Augereau & Shane Greenstein & Marc Rysman, 2004. "Coordination vs. Differentiation in a Standards War: 56K Modems," NBER Working Papers 10334, National Bureau of Economic Research, Inc.
- Austin, David & Dinan, Terry, 2005. "Clearing the air: The costs and consequences of higher CAFE standards and increased gasoline taxes," Journal of Environmental Economics and Management, Elsevier, vol. 50(3), pages 562-582, November.
- Anna Alberini & Winston Harrington & Virginia McConnell, 1995. "Determinants of Participation in Accelerated Vehicle-Retirement Programs," RAND Journal of Economics, The RAND Corporation, vol. 26(1), pages 93-112, Spring.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.