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An Empirical Model of Automobile Engine Variant Pricing

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  • Øyvind Thomassen

Abstract

This paper estimates a random-coefficients structural model of the demand for car model engine variants. It uses a new identification approach that assumes the mean unobserved quality is the same for all engine variants within a model. The demand estimates imply that absolute markups increase in horsepower within a car model, while percentage markups are constant or falling in horsepower. The estimated results–as well as simulations of a simple theory model–show that prices are not typically cost-plus-fixed-fee, and absolute markups may increase in quality.

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  • Øyvind Thomassen, 2017. "An Empirical Model of Automobile Engine Variant Pricing," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 24(3), pages 275-293, September.
    • Handle: RePEc:taf:ijecbs:v:24:y:2017:i:3:p:275-293
    DOI: 10.1080/13571516.2017.1333733
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    Cited by:

    1. Néstor Duch-Brown & Lukasz Grzybowski & André Romahn & Frank Verboven, 2023. "Evaluating the Impact of Online Market Integration—Evidence from the EU Portable PC Market," American Economic Journal: Microeconomics, American Economic Association, vol. 15(4), pages 268-305, November.
    2. Cincotta, Costanza & Thomassen, Øyvind, 2023. "Evaluating Norway’s electric vehicle incentives," Discussion Papers 2023/19, Norwegian School of Economics, Department of Business and Management Science.

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