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Interaction between price, quality and country of origin when estimating automobile demand: the case of Turkey

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  • C. Emre Alper
  • Ayse Mumcu

Abstract

We estimate the demand for new automobiles in Turkey immediately following its entry to Custom Union with the European Union in 1996. We use quarterly data on price, quantity, quality, country of origin and product characteristics of the new automobile sales market and macroeconomic variables to estimate market demand during 1996-1999 using dynamic Generalized Least Squares Estimation method. In addition to including quality, we also include country of origin, to serve as another proxy for quality and to capture differences in cost-increasing and demand-reducing trade restrictions imposed on cars from certain countries as well as taste differences. Our results indicate that country of origin as well as quality matter for automobile demand in Turkey. Consistent with other aggregate automobile demand models for other countries, the demand for new automobiles is found to be price inelastic in the short run.

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  • C. Emre Alper & Ayse Mumcu, 2007. "Interaction between price, quality and country of origin when estimating automobile demand: the case of Turkey," Applied Economics, Taylor & Francis Journals, vol. 39(14), pages 1789-1796.
    • Handle: RePEc:taf:applec:v:39:y:2007:i:14:p:1789-1796
    DOI: 10.1080/00036840600707050
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    References listed on IDEAS

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    1. Fershtman, C. & Gandal, N. & Markovich, S., 1997. "Estimating the Effect of Tax Reform in Differentiated Product Oligopolistic Markets," Papers 29-97, Tel Aviv.
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    4. Frank Verboven, 1996. "International Price Discrimination in the European Car Market," RAND Journal of Economics, The RAND Corporation, vol. 27(2), pages 240-268, Summer.
    5. Trandel, Gregory A, 1991. "The Bias Due to Omitting Quality When Estimating Automobile Demand," The Review of Economics and Statistics, MIT Press, vol. 73(3), pages 522-525, August.
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    Cited by:

    1. Ufuk Demiroglu & Caglar Yunculer, 2016. "Estimating light-vehicle sales in Turkey," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 16(3), pages 93-108.
    2. Eric Kateta Tshiakambila & Joseph Chisasa, 2017. "Food Inflation and Passenger Vehicle Purchases in South Africa: Cointegration, Short Run Dynamics and Causality," Journal of Economics and Behavioral Studies, AMH International, vol. 9(5), pages 122-134.
    3. Homolka, Lubor & Ngo, Vu Minh & Pavelková, Drahomíra & Le, Bach Tuan & Dehning, Bruce, 2020. "Short- and medium-term car registration forecasting based on selected macro and socio-economic indicators in European countries," Research in Transportation Economics, Elsevier, vol. 80(C).
    4. Kemal Çelik & Erkan Oktay & Muhsin Doğan Ebül & Ömer Özhancı, 2015. "Factors influencing consumers’ light commercial vehicle purchase intention in a developing country," Management & Marketing, Sciendo, vol. 10(2), pages 148-162, September.
    5. Cumhur Erdem & Saban Nazlioglu, 2013. "Determinants of new vehicle registrations in EU countries: a panel cointegration analysis," Transportation Planning and Technology, Taylor & Francis Journals, vol. 36(3), pages 287-298, April.

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