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Product quality, product price, and share dynamics in the German compact car market

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  • Uwe Cantner
  • Jens J. Krüger
  • René Söllner

Abstract

The present article examines one of the central elements of evolutionary thinking--competition formalized by the replicator dynamics mechanism. Using data on product characteristics of automobiles sold on the German domestic market over the period 2001--2006, we construct a competitiveness or fitness indicator for each car model applying non-parametric efficiency measurement techniques. The basic question we intend to answer is whether cars providing a higher quality--price ratio for consumers tend to increase their market share compared to variants with lower quality--price ratios. The relationship between a car models' fitness and its market performance is empirically tested in a regression framework. The results show that the principle of "growth of the fitter" is working as suggested by evolutionary theory. In particular, we find that car models with considerably lower fitness than the market average lose additional market shares, whereas models with above-average fitness gain additional market shares. Copyright 2012 The Author 2012. Published by Oxford University Press on behalf of Associazione ICC. All rights reserved., Oxford University Press.

Suggested Citation

  • Uwe Cantner & Jens J. Krüger & René Söllner, 2012. "Product quality, product price, and share dynamics in the German compact car market," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 21(5), pages 1085-1115, October.
    • Handle: RePEc:oup:indcch:v:21:y:2012:i:5:p:1085-1115
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    File URL: http://hdl.handle.net/10.1093/icc/dts002
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    Citations

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    Cited by:

    1. Giovanni Dosi & Emanuele Pugliese & Pietro Santoleri, 2017. "Growth and survival of the `fitter'? Evidence from US new-born firms," LEM Papers Series 2017/06, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    2. Eric Kemp-Benedict, 2022. "A classical-evolutionary model of technological change," Journal of Evolutionary Economics, Springer, vol. 32(4), pages 1303-1343, September.
    3. Uwe Cantner & Ivan Savin & Simone Vannuccini, 2019. "Replicator dynamics in value chains: explaining some puzzles of market selection," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 28(3), pages 589-611.
    4. Flavio Calvino & Maria Enrica Virgillito, 2016. "The Innovation-Employment nexus: a critical survey of theory and empirics," LEM Papers Series 2016/10, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    5. Uwe Cantner, 2017. "Foundations of Economic Change: An Extended Schumpeterian Approach," Economic Complexity and Evolution, in: Andreas Pyka & Uwe Cantner (ed.), Foundations of Economic Change, pages 9-49, Springer.
    6. Jan Schulz & Daniel M. Mayerhoffer, 2021. "Equal chances, unequal outcomes? Network-based evolutionary learning and the industrial dynamics of superstar firms," Journal of Business Economics, Springer, vol. 91(9), pages 1357-1385, November.
    7. Luca Fontanelli, 2023. "Theories of market selection: a survey," LEM Papers Series 2023/22, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    8. Zhao Rong & David C. Broadstock & Yuanyuan Peng, 2018. "Initial submarket positioning and firm survival: evidence from the British automobile industry, 1895–1970," Small Business Economics, Springer, vol. 51(4), pages 965-993, December.
    9. Mundt, Philipp & Cantner, Uwe & Inoue, Hiroyasu & Savin, Ivan & Vannuccini, Simone, 2021. "Market selection in global value chains," BERG Working Paper Series 170, Bamberg University, Bamberg Economic Research Group.
    10. Savin, I., 2020. "Studying market selection in Russia and abroad: Measurement problems, national specificity and stimulating methods," Journal of the New Economic Association, New Economic Association, vol. 48(4), pages 197-204.
    11. Antti Simola, 2018. "Government payments, market profits and structural change in agriculture," Journal of Evolutionary Economics, Springer, vol. 28(4), pages 837-857, September.
    12. Claussen, Jörg & Essling, Christian & Kretschmer, Tobias, 2015. "When less can be more – Setting technology levels in complementary goods markets," Research Policy, Elsevier, vol. 44(2), pages 328-339.
    13. Cantner, Uwe & Vannuccini, Simone, 2021. "Pervasive technologies and industrial linkages: Modeling acquired purposes," Structural Change and Economic Dynamics, Elsevier, vol. 56(C), pages 386-399.
    14. van der Vooren, A. & Alkemade, F. & Hekkert, M.P., 2013. "Environmental performance and firm strategies in the dutch automotive sector," Transportation Research Part A: Policy and Practice, Elsevier, vol. 54(C), pages 111-126.

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