Analysis of Product Efficiency in the Korean Automobile Market from a Consumer’s Perspective
AbstractA product is called technically inefficient when it has higher price and/or lower quality than others. Technical inefficiency of product has been conceptualized since Lancaster (1966), and empirically measured by many researchers, for example, Fernandez-Castro and Smith (2002) and Lee et al. (2005) among others. If we know further the information about structure of utility function, allocative inefficiency can also be measured. Even though a product is technically efficient with highest quality together with lowest price, it could not be chosen in the market, if it cannot match the preference structure of consumers, i.e. it is allocatively inefficient. This study poses a conceptual and methodological framework to measure technical and allocative efficiency at the product level considering consumer’s choice, which comprises the overall efficiency. Empirically we combine Data Envelopment Analysis (DEA) and discrete choice model to measure the level of inefficiencies. The suggested framework is applied to the Korean automobile market. The relationship between the level of efficiency and market performance in terms of market share is discussed.
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoPaper provided by The Ratio Institute in its series Ratio Working Papers with number 95.
Length: 28 pages
Date of creation: 25 Apr 2006
Date of revision:
Note: Forthcoming i Empirical Economics.
Contact details of provider:
Postal: The Ratio Institute, P.O. Box 5095, SE-102 42 Stockholm, Sweden
Phone: 08-441 59 00
Fax: 08-441 59 29
Web page: http://www.ratio.se/
More information through EDIRC
DEA; Product Efficiency; Consumers Utility; Automobile Market; Korea;
Other versions of this item:
- Inha Oh & Jeong-Dong Lee & Seogwon Hwang & Almas Heshmati, 2010. "Analysis of product efficiency in the Korean automobile market from a consumer’s perspective," Empirical Economics, Springer, vol. 38(1), pages 119-137, February.
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
- L92 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Railroads and Other Surface Transportation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-04-29 (All new papers)
- NEP-EFF-2006-04-29 (Efficiency & Productivity)
- NEP-MKT-2006-04-29 (Marketing)
- NEP-SEA-2006-04-29 (South East Asia)
- NEP-UPT-2006-04-29 (Utility Models & Prospect Theory)
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.:
- Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
- M. Halme & T. Joro & P. Korhonen & S. Salo & J. Wallenius, 1998. "Value Efficiency Analysis for Incorporating Preference Information in Data Envelopment Analysis," Working Papers ir98054, International Institute for Applied Systems Analysis.
- Kenneth Train, 2003.
"Discrete Choice Methods with Simulation,"
Online economics textbooks,
SUNY-Oswego, Department of Economics, number emetr2.
- Kaiser, Ulrich, 2001.
"The effects of website provision on the demand for German women's magazines,"
ZEW Discussion Papers
01-69, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Ulrich Kaiser, 2002. "The Effects of Website Provision on the Demand for German Women's Magazines," NBER Working Papers 8806, National Bureau of Economic Research, Inc.
- Wojcik, Charlotte, 2000. "Alternative models of demand for automobiles," Economics Letters, Elsevier, vol. 68(2), pages 113-118, August.
- Angel S. Fernandez-Castro & Peter C. Smith, 2002. "Lancaster's characteristics approach revisited: product selection using non-parametric methods," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 23(2), pages 83-91.
- Christos Papahristodoulou, 1997. "A DEA model to evaluate car efficiency," Applied Economics, Taylor & Francis Journals, vol. 29(11), pages 1493-1508.
- Aviv Nevo, 2000. "A Practitioner's Guide to Estimation of Random-Coefficients Logit Models of Demand," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(4), pages 513-548, December.
- McFadden, Daniel, 1974. "The measurement of urban travel demand," Journal of Public Economics, Elsevier, vol. 3(4), pages 303-328, November.
- Wojcik, Charlotte, 2001. "Learning by Consumers in the Demand for Japanese Cars," Review of International Economics, Wiley Blackwell, vol. 9(1), pages 94-107, February.
- James Levinsohn & Steven Berry & Ariel Pakes, 1999. "Voluntary Export Restraints on Automobiles: Evaluating a Trade Policy," American Economic Review, American Economic Association, vol. 89(3), pages 400-430, June.
- Ley, Eduardo & Steel, Mark F J, 1996.
"On the Estimation of Demand Systems through Consumption Efficiency,"
The Review of Economics and Statistics,
MIT Press, vol. 78(3), pages 539-43, August.
- Eduardo Ley & Mark F.J. Steel, 1995. "On the Estimation of Demand Systems Through Consumption Efficiency," Econometrics 9503001, EconWPA, revised 22 Feb 1996.
- Merja Halme & Tarja Joro & Pekka Korhonen & Seppo Salo & Jyrki Wallenius, 1999. "A Value Efficiency Approach to Incorporating Preference Information in Data Envelopment Analysis," Management Science, INFORMS, vol. 45(1), pages 103-115, January.
- Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74, pages 132.
- De Borger, Bruno & Kerstens, Kristiaan, 1996. "Cost efficiency of Belgian local governments: A comparative analysis of FDH, DEA, and econometric approaches," Regional Science and Urban Economics, Elsevier, vol. 26(2), pages 145-170, April.
- Pekka Korhonen & Mikko Syrjänen, 2005. "On the Interpretation of Value Efficiency," Journal of Productivity Analysis, Springer, vol. 24(2), pages 197-201, October.
- Lee, Jeongdong & Repkine, Alexandre & Hwang, Seogwon & Kim, Taiyoo, 2004. "Estimating Consumers’ Willingness to Pay for the Individual Quality Attributes with DEA," MPRA Paper 7848, University Library of Munich, Germany.
- Uwe Cantner & Jens J. Krüger & René Söllner, 2012.
"Product quality, product price, and share dynamics in the German compact car market,"
Industrial and Corporate Change,
Oxford University Press, vol. 21(5), pages 1085-1115, October.
- Uwe Cantner & Jens J. Krüger & Rene Söllner, 2010. "Product Quality, Product Price, and Share Dynamics in the German Compact Car Market," Jena Economic Research Papers 2010-024, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
- Voltes-Dorta, Augusto & Perdiguero, Jordi & Jiménez, Juan Luis, 2013. "Are car manufacturers on the way to reduce CO2 emissions?: A DEA approach," Energy Economics, Elsevier, vol. 38(C), pages 77-86.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Martin Korpi).
If references are entirely missing, you can add them using this form.