Modeling price-related consequences of the brand origin cue: An empirical examination of the automobile market
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Price-related consequences of the country-of-origin (COO) cue have been widely neglected in the literature. This paper applies hedonic price analysis to examine a brand’s COO effect on new car prices. The application of our models to an extensive dataset demonstrates that prices of new cars reflect not only implicit prices of performance and technological characteristics but also price distortions that arise out of COO heterogeneity. Moreover, by allowing model parameters to vary across car type segments, we are able to capture patterns of differential attribute and COO effects on prices, which are indicative of implicit price discrimination strategies. The paper provides new interesting insights into critical issues for pricing strategy and demonstrates the role of brand origin, segments, and observed product differences in the price structure of the automobile market. Our findings yield important implications for manufacturers and researchers.
KeywordsCountry-of-origin Pricing Car market Price premiums Hedonic price analysis
The authors would like to thank the editorial team of BBC’s Top Gear car magazine, which supported this study. Thanks are also due to several professionals in the automotive field for their valuable suggestions. The views expressed are those of the authors, who are also responsible for any errors.
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