Audi vs. BMW – On the Physical Heterogeneity of German Luxury Cars

Claus Vistesen

MPRA Paper from University Library of Munich, Germany

Abstract: This paper uses Logit and Probit regressions to test for and quantify the physical heterogeneity between German luxury cars. Using a matched sample database, the binary response variable consisting of Audis and BMWs is fitted to a matrix of physical characteristics such as power, torque, fuel consumption, engine displacement etc. The results indicate that having a forced induction engine (e.g. turbo) is associated with a 51% lower probability of observing a BMW and that increasing fuel consumption by 1 liter per 100km lowers the probability of observing a BMW with 61%. The results are discussed in relation to the idea that consumers may not differentiate across luxury products on the basis of physical characteristics and how this may introduce a bias with respect to predicting demand in the context of available market data.

Keywords: Audi; BMW; automobile industry; pure characteristics demand models; luxury cars (search for similar items in EconPapers)
JEL-codes: L62 (search for similar items in EconPapers)
Date: 2009-12-18
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:19516

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