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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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    References listed on IDEAS

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    Cited by:

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    2. M. Berk Talay & M. Billur Akdeniz & Ahmet H. Kirca, 2017. "When do the stock market returns to new product preannouncements predict product performance? Empirical evidence from the U.S. automotive industry," Journal of the Academy of Marketing Science, Springer, vol. 45(4), pages 513-533, July.
    3. Alex Burnap & John Hauser, 2018. "Predicting "Design Gaps" in the Market: Deep Consumer Choice Models under Probabilistic Design Constraints," Papers 1812.11067, arXiv.org.
    4. Miguel-Angel Pardo-Vicente & Patricia Camacho-Magriñan & Pablo Pavon-Dominguez, 2022. "Influence of Technology on Perceived Obsolescence though Product Design Properties," Sustainability, MDPI, vol. 14(21), pages 1-16, November.
    5. Park, Jiyoun & Nam, Changi & Kim, Hye-jin & Kim, Seongcheol, 2018. "What are the relative importance of smart car utilities from consumer perspective and who will lead them?," 22nd ITS Biennial Conference, Seoul 2018. Beyond the boundaries: Challenges for business, policy and society 190334, International Telecommunications Society (ITS).
    6. Talke, Katrin & Müller, Sebastian & Wieringa, Jaap E., 2017. "A matter of perspective: Design newness and its performance effects," International Journal of Research in Marketing, Elsevier, vol. 34(2), pages 399-413.
    7. 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.

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    More about this item

    Keywords

    automobile pricing; warranty; safety appliances; rebranding; reliability;
    All these keywords.

    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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