Abstract
This paper is aimed at exploring the existence of typical patterns of automobile model life and the formal test for age effects in a discrete-choice demand framework estimated with data on the models sold in the Spanish market. Estimates show that the evolution of market shares entails and quantifies age effects resulting from consumer demand. These effects are clearly distinguishable from the impacts generated by changes in attributes and firm pricing. They carry an exogenous factor that is full of implications for firm behaviour over the life of a model: the modification of demand price sensitivities. As a result, for example, equilibrium own-price elasticities are observed to decrease until the fourth year of a model life, and then to increase again.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Arellano M, Honoré B (2001) Panel data models: some recent developments. In: Heckman J, Leamer E (eds) Handbook of Econometrics, vol 5, ch. 5. Elsevier, Amsterdam, pp 3229–3296
Arellano M, Bover O (1995) Another look at the instrumental-variable estimation of error components models. J Econ 68:29–51
Asplund M, Sandin R (1999) The survival of new products. Rev Ind Organization 15:219–237
Berry ST (1994) Estimating discrete-choice models of product differentiation. RAND J Econ 25:242–262
Berry ST, Levinsohn J, Pakes A (1995) Automobile prices in market equilibrium. Econometrica 63:841–890
Berry ST, Levinsohn J, Pakes A (1999) Voluntary export restraints on automobiles: evaluating a trade policy. Am Econ Rev 89:400–430
Berry ST, Levinsohn J, Pakes A (2004) Differentiated product demand systems from a combination of micro and macro data: the new car market. J Polit Econ 112(1):68–105
Bhargava A, Sargan JD (1983) Estimating dynamic random effects models from panel data covering short time periods. Econometrica 51:1635–1659
Blundell R, Bond S (2000) GMM estimation with persistent panel data: an application to production functions. Econ Rev 19(3):321–340
Bresnahan TF (1987) Competition and collusion in the American automobile industry: the 1955 price war. J Ind Econ 35:457–482
Bresnahan TF, Stern S, Trajtenberg M (1997) Market segmentation and the sources of rents from innovation: personal computers in the late 1980s. RAND J Econ 28:17–44
Cardell NS (1997) Variance components structures for the extreme-value and logistic distributions with applications to models of heterogeneity. Econ Theory 13(2):185–213
Davis P (2006) Spatial competition in retail markets: movie theatres. RAND J Econ (in press)
Feenstra R, Levinsohn J (1995) Estimating markups and market conduct with multidimensional product attributes. Rev Econ Stud 62:19–52
Goeree M (2005) Advertising in the US personal computer industry. Claremont McKenna College, Mimeo
Goldberg PK (1995) Product differentiation and oligopoly in international markets: the case of the U.S. automobile industry. Econometrica 63:891–951
Goldberg PK, Verboven F (2001) The evolution of price dispersion in the European car market. Rev Econ Stud 68:811–848
Greenstein SM, Wade JB (1998) The product life cycle in the commercial mainframe computer market, 1968–1982. RAND J Econ 29:772–789
Kiefer M (1988) Economic duration data and hazard functions. J Econ Lit 26:646–679
Klepper S (1996) Entry, exit, growth and innovation over the product life cycle. Am Econ Rev 86:562–583
Kwoka JE (1996) Altering the product life cycle of consumer durables: the case of minivans. Manage Decis Econ 17:17–25
Moral MJ (1999) El Mercado De Automóviles En España: Un Modelo De Oligopolio Con Producto Diferenciado. Doctoral thesis, Universidad Complutense de Madrid
Nevo A (2000) A practitioner’s guide to estimation of random coefficients logit models of demand. J Econ Manag Strategy 9:513–548
Newey WK, West KD (1987) A simple, positive semi-definite, heteroskedasticity and autocorrelation consistent covariance matrix. Econometrica 55:703–708
Nickell S (1981) Biases in dynamic models with fixed effects. Econometrica 49:1417–1426
Petrin A (2002) Quantifying the benefits of new products: the case of minivan. J Polit Econ 110(4):705–729
Stavins J (1995) Model entry and exit in a differentiated-product industry: the personal computer market. Rev Econ Stat 77:571–584
Verboven F (1996) International price discrimination in the European car market. RAND J Econ 27:240–268
Wand MP, Jones MC (1995) Kernel Smoothing. Chapman& Hall, London
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Moral, M.J., Jaumandreu, J. Automobile demand, model cycle and age effects. SpanEconRev 9, 193–218 (2007). https://doi.org/10.1007/s10108-006-9014-y
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10108-006-9014-y