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Non-Price Determinants of Automotive Demand: Restyling Matters Most

Author

Listed:
  • 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)

Abstract

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.

Suggested Citation

  • Oleg Korenok & George E. Hoffer & Edward L. Millner, 2009. "Non-Price Determinants of Automotive Demand: Restyling Matters Most," Working Papers 0903, VCU School of Business, Department of Economics.
  • Handle: RePEc:vcu:wpaper:0903
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    File URL: http://www.people.vcu.edu/~okorenok/JBR090809.pdf
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    References listed on IDEAS

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    1. repec:eee:ijrema:v:34:y:2017:i:2:p:399-413 is not listed on IDEAS
    2. González, Eduardo & Cárcaba, Ana & Ventura, Juan, 2015. "How car dealers adjust prices to reach the product efficiency frontier in the Spanish automobile market," Omega, Elsevier, vol. 51(C), pages 38-48.

    More about this item

    Keywords

    automobile pricing; warranty; safety appliances; rebranding; reliability;

    JEL classification:

    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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