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Product Quality, Product Price, and Share Dynamics in the German Compact Car Market

Author Info

  • Uwe Cantner

    ()

    (School of Economics and Business Administration, Friedrich-Schiller-University Jena)

  • Jens J. Krüger

    ()

    (Technical University Darmstadt, Fachbereich Rechts- und Wirtschaftswissenschaften)

  • Rene Söllner

    ()

    (Friedrich Schiller University Jena, DFG-RTG "The Economics of Innovative Change")

Abstract

The present paper 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 variable 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, whereas models with above-average fitness gain additional market shares.

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Paper provided by Friedrich-Schiller-University Jena in its series Jena Economic Research Papers with number 2010-024.

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Date of creation: 07 Apr 2010
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Handle: RePEc:jrp:jrpwrp:2010-024
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Keywords: Replicator Dynamics; Product Characteristics; Data Envelopment Analysis;

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Find related papers by JEL classification:
  • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
  • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
  • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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Cited by:

  1. Kaldasch, Joachim, 2015. "Dynamic Model of Markets of Homogenous Non-Durables," EconStor Open Access Articles, ZBW - German National Library of Economics, pages 1-12 Articl.
  2. Kaldasch, Joachim, 2014. "Evolutionary Model of Moore’s Law," MPRA Paper 54397, University Library of Munich, Germany.
  3. 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.
  4. Uwe Cantner & Ivan Savin & Simone Vannuccini, 2016. "Replicator dynamics in value chains: explaining some puzzles of market selection," Working Papers of BETA 2016-09, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  5. Claussen, Jörg & Essling, Christian & Kretschmer, Tobias, 2015. "When less can be more – Setting technology levels in complementary goods markets," Research Policy, Elsevier, vol. 44(2), pages 328-339.
  6. Flavio Calvino & Maria Enrica Virgillito, 2016. "The Innovation-Employment nexus: a critical survey of theory and empirics," LEM Papers Series 2016/10, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  7. 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.

This item is featured on the following reading lists or Wikipedia pages:

  1. Studies on the automobile industry

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