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Non-Price Determinants of Automotive Demand: Restyling Matters Most

  • Oleg Korenok

    ()

    (Department of Economics, VCU School of Business)

  • George E. Hoffer

    ()

    (Department of Economics, VCU School of Business)

  • Edward L. Millner

    ()

    (Department of Economics, VCU School of Business)

This paper analyzes market share changes in automobile and light truck submarkets. We find that new product, as measured by restyling, represents the most consistent, dominant determinant of demand. On average a ten percent reduction in relative price would yield only one-tenth the market share impact of a restyling. Alternatively, one would have to double one’s relative advertising expenditures to match the impact of a restyling. Several demand determinants not previously modeled, including rebranding and warranty curtailments, were detrimental to domestic manufacturer market shares. Safety appliance adoptions and changes in vehicle reliability had minimal impact on demand.

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File URL: http://www.people.vcu.edu/~okorenok/JBR090809.pdf
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Paper provided by VCU School of Business, Department of Economics in its series Working Papers with number 0903.

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Length: 24 pages
Date of creation: Sep 2009
Date of revision:
Publication status: Forthcoming in Journal of Business Research
Handle: RePEc:vcu:wpaper:0903
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  1. Delre, S.A. & Jager, W. & Bijmolt, T.H.A. & Janssen, M.A., 2007. "Targeting and timing promotional activities: An agent-based model for the takeoff of new products," Journal of Business Research, Elsevier, vol. 60(8), pages 826-835, August.
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  3. Bresnahan, Timothy F., 1981. "Departures from marginal-cost pricing in the American automobile industry : Estimates for 1977-1978," Journal of Econometrics, Elsevier, vol. 17(2), pages 201-227, November.
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  5. Kwoka, John E, Jr, 1993. "The Sales and Competitive Effects of Styling and Advertising Practices in the U.S. Auto Industry," The Review of Economics and Statistics, MIT Press, vol. 75(4), pages 649-56, November.
  6. Devavrat Purohit, 1992. "Exploring the Relationship Between the Markets for New and Used Durable Goods: The Case of Automobiles," Marketing Science, INFORMS, vol. 11(2), pages 154-167.
  7. McCarthy, Patrick S, 1996. "Market Price and Income Elasticities of New Vehicles Demand," The Review of Economics and Statistics, MIT Press, vol. 78(3), pages 543-47, August.
  8. Reilly, Robert J & Hoffer, George E, 1983. "Will Retarding the Information Flow on Automobile Recalls Affect Consumer Demand?," Economic Inquiry, Western Economic Association International, vol. 21(3), pages 444-47, July.
  9. Kim, Chung Koo, 1996. "The interaction between price and long-run variables in a multinational brand market," Journal of Business Research, Elsevier, vol. 37(1), pages 1-14, September.
  10. Nakata, Cheryl & Im, Subin & Park, Heungsoo & Ha, Young-Won, 2006. "Antecedents and consequence of Korean and Japanese new product advantage," Journal of Business Research, Elsevier, vol. 59(1), pages 28-36, January.
  11. Chang, Dae Ryun & Cho, Hang, 2008. "Organizational memory influences new product success," Journal of Business Research, Elsevier, vol. 61(1), pages 13-23, January.
  12. Boulding, William & Purohit, Devavrat, 1996. " The Price of Safety," Journal of Consumer Research, University of Chicago Press, vol. 23(1), pages 12-25, June.
  13. Kenneth E. Train & Clifford Winston, 2007. "Vehicle Choice Behavior And The Declining Market Share Of U.S. Automakers," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(4), pages 1469-1496, November.
  14. Meghan Busse & Jorge Silva-Risso & Florian Zettelmeyer, 2006. "$1,000 Cash Back: The Pass-Through of Auto Manufacturer Promotions," American Economic Review, American Economic Association, vol. 96(4), pages 1253-1270, September.
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