Automobile engine variants and price discrimination
AbstractUsing a structural model of demand for automobile engine variants, this paper finds that there is second-degree price discrimination: markups increase with engine size. Still, average markups are lower than when models have just one engine. The paper develops the first empirical demand framework suitable for markets with variants. There is an unobserved product characteristic and a consumer-specific logit term for classes of products, but both are fixed across variants. Fixed effects control for unobservables. The literature’s assumption of orthogonality between unobserved and observed product characteristics is not needed.
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 Katholieke Universiteit Leuven, Centrum voor Economische Studiën in its series Center for Economic Studies - Discussion papers with number ces10.15.
Date of creation: Apr 2010
Date of revision:
second-degree price discrimination; automobiles; discrete-choice demand models;
Other versions of this item:
- Thomassen, Oyvind, 2010. "Automobile engine variants and price dicrimination," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/267471, Katholieke Universiteit Leuven.
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment
- C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-12-23 (All new papers)
- NEP-BEC-2010-12-23 (Business Economics)
- NEP-COM-2010-12-23 (Industrial Competition)
- NEP-IND-2010-12-23 (Industrial Organization)
- NEP-MKT-2010-12-23 (Marketing)
You can help add them by filling out this form.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Karla Vander Weyden).
If references are entirely missing, you can add them using this form.