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Blurred Boundaries: A Flexible Approach for Segmentation Applied to the Car Market

Laura Grigolon ()

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: Prominent features of differentiated product markets are segmentation and product proliferation that blurs the boundaries between segments. I develop a tractable demand model, the Ordered Nested Logit, which allows for asymmetric substitution between segments. I apply the model to the automobile market where segments are ordered from small to luxury. I find that consumers, when substituting outside their vehicle segment, are more likely to switch to a neighboring segment. Accounting for such asymmetric substitution matters when evaluating the impact of new product introduction or the effect of subsidies on fuel-efficient cars.

JEL-codes: D11 D12 L62 M3 (search for similar items in EconPapers)
Pages: 45
Date: 2019-09
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Related works:
Journal Article: Blurred boundaries: A flexible approach for segmentation applied to the car market (2021) Downloads
Working Paper: Blurred boundaries: a flexible approach for segmentation applied to the car market (2021) Downloads
Working Paper: Blurred boundaries: a flexible approach for segmentation applied to the car market (2017) Downloads
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