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Estimating Automotive Elasticities from Segment Elasticities and First Choice/Second Choice Data

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  • Bordley, Robert F

Abstract

Of the share lost to one product because of a price change, diversion fractions are the fractions of that lost share going to each of the other products. This paper expresses product cross-elasticities in terms of diversion fractions and a scaling factor. Since the automotive market includes more than two-hundred products, time-series data are insufficient for estimating all elasticities. Instead, this paper estimates automotive elasticities by specifying the diversion fractions using cross-sectional first choice/second choice data and estimating the remaining scaling factor and own-elasticities using more aggregate elasticities estimated from time series. Copyright 1993 by MIT Press.

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  • Bordley, Robert F, 1993. "Estimating Automotive Elasticities from Segment Elasticities and First Choice/Second Choice Data," The Review of Economics and Statistics, MIT Press, vol. 75(3), pages 455-462, August.
    • Handle: RePEc:tpr:restat:v:75:y:1993:i:3:p:455-62
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    Cited by:

    1. Ibon Galarraga & David Heres Del Valle & Mikel González-Eguino, 2011. "Price Premium for High-Efficiency Refrigerators and Calculation of Price-Elasticities for Close-Substitutes: Combining Hedonic Pricing and Demand Systems," Working Papers 2011-07, BC3.
    2. DeShazo, J.R. & Sheldon, Tamara L. & Carson, Richard T., 2017. "Designing policy incentives for cleaner technologies: Lessons from California's plug-in electric vehicle rebate program," Journal of Environmental Economics and Management, Elsevier, vol. 84(C), pages 18-43.
    3. Mathiesen, Lars & Nilsen, Øivind Anti & Sørgard, Lars, 2011. "Merger simulations with observed diversion ratios," International Review of Law and Economics, Elsevier, vol. 31(2), pages 83-91, June.
    4. Greene, David L. & Patterson, Philip D. & Singh, Margaret & Li, Jia, 2005. "Feebates, rebates and gas-guzzler taxes: a study of incentives for increased fuel economy," Energy Policy, Elsevier, vol. 33(6), pages 757-775, April.
    5. Franz Hackl & Michael Hölzl-Leitner & Dieter Pennerstorfer, 2021. "How to Measure Product Differentiation," Economics working papers 2021-01, Department of Economics, Johannes Kepler University Linz, Austria.
    6. Robert F. Bordley, 2011. "Using Bayes' Rule to Update an Event's Probabilities Based on the Outcomes of Partially Similar Events," Decision Analysis, INFORMS, vol. 8(2), pages 117-127, June.
    7. Michael Salinger & Keith Anderson & Christopher Garmon & David Schmidt & John Yun, 2006. "Economics at the FTC: Data Intensive Mergers and Policy R&D," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 29(4), pages 327-348, December.
    8. Leard, Benjamin & Wu, Yidi, 2023. "New Passenger Vehicle Demand Elasticities: Estimates and Policy Implications," RFF Working Paper Series 23-33, Resources for the Future.
    9. Jason Nassios & John Madden & James Giesecke & Janine Dixon & Nhi Tran & Peter Dixon & Maureen Rimmer & Philip Adams & John Freebairn, 2019. "The economic impact and efficiency of state and federal taxes in Australia," Centre of Policy Studies/IMPACT Centre Working Papers g-289, Victoria University, Centre of Policy Studies/IMPACT Centre.
    10. C. Homburg & Julia Nasev & Philipp Plank, 2018. "The impact of cost allocation errors on price and product-mix decisions," Review of Quantitative Finance and Accounting, Springer, vol. 51(2), pages 497-527, August.
    11. van den Bijgaart, Inge, 2016. "Essays in environmental economics and policy," Other publications TiSEM 298bee2a-cb08-4173-9fe1-8, Tilburg University, School of Economics and Management.
    12. Reyer Gerlagh & Inge Bijgaart & Hans Nijland & Thomas Michielsen, 2018. "Fiscal Policy and $$\hbox {CO}_{2}$$ CO 2 Emissions of New Passenger Cars in the EU," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 69(1), pages 103-134, January.
    13. Cécile Denis & Gert Jan Koopman, 1998. "EUCARS: A partial equilibrium model of EUropean CAR emissions (Version 3.0)," European Economy - Economic Papers 2008 - 2015 130, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    14. Michael Löffler, 2015. "Measuring willingness to pay: do direct methods work for premium durables?," Marketing Letters, Springer, vol. 26(4), pages 535-548, December.
    15. Robert F. Bordley, 2023. "Lessons for Decision-Analysis Practice from the Automotive Industry," Interfaces, INFORMS, vol. 53(3), pages 240-246, May.
    16. Leard, Benjamin, 2019. "Estimating Consumer Substitution Between New and Used Passenger Vehicles," RFF Working Paper Series 19-01, Resources for the Future.
    17. Galarraga, Ibon & González-Eguino, Mikel & Markandya, Anil, 2011. "Willingness to pay and price elasticities of demand for energy-efficient appliances: Combining the hedonic approach and demand systems," Energy Economics, Elsevier, vol. 33(S1), pages 66-74.

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