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Intertemporal substitution and new car purchases

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  • Adam Copeland

Abstract

type="main"> This article presents a dynamic demand model for motor vehicles. This approach accounts for the change in the mix of consumers over the model year and measures consumers' substitution patterns across products and time. I find intertemporal substitution is significant; consumers are more likely to change the timing of their purchase in reaction to a price increase rather than buy another vehicle in the same period. Further, I find automakers' use of large cash-back rebates at the end of the model year, although boosting overall sales, induces large numbers of consumers to delay their purchases and so pay lower prices.

Suggested Citation

  • Adam Copeland, 2014. "Intertemporal substitution and new car purchases," RAND Journal of Economics, RAND Corporation, vol. 45(3), pages 624-644, September.
  • Handle: RePEc:bla:randje:v:45:y:2014:i:3:p:624-644
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    File URL: http://hdl.handle.net/10.1111/1756-2171.12065
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    4. Feng, Lipan & Zheng, Xiong & Govindan, Kannan & Xue, Kelei, 2019. "Does the presence of secondary market platform really hurt the firm?," International Journal of Production Economics, Elsevier, vol. 213(C), pages 55-68.

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