Portfolio Considerations in Differentiated Product Purchases: An Application to the Japanese Automobile Market

Naoki Wakamori

Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems from Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich

Abstract: Consumers often purchase more than one differentiated product, assembling a portfolio, which might potentially affect substitution patterns of demand and, as a consequence, oligopolistic firms’ pricing strategies. To study such consumers’ portfolio considerations, this paper develops and estimates a structural model that allows for flexible complementarities/substitutabilities, using Japanese household-level data on automobile purchases. My estimates suggest that complementarities arise when households purchase a combination of one small automobile and one minivan as their portfolio. Simulation results suggest that, due to such portfolio considerations, a policy proposal of repealing the current tax subsidies for small eco-friendly automobiles would not necessarily sharply decrease the demand.

Keywords: Multiple Discrete Choices; Complementarities; Environmental Policy (search for similar items in EconPapers)
JEL-codes: D43 L13 L62 Q58 (search for similar items in EconPapers)
Date: 2015-04-21
New Economics Papers: this item is included in nep-com, nep-env and nep-ind
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Portfolio Considerations in Differentiated Product Purchases: An Application to the Japanese Automobile Market (2011)
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