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
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)
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Journal Article: Blurred boundaries: A flexible approach for segmentation applied to the car market (2021)
Working Paper: Blurred boundaries: a flexible approach for segmentation applied to the car market (2021)
Working Paper: Blurred boundaries: a flexible approach for segmentation applied to the car market (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:bon:boncrc:crctr224_2019_127
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