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Blurred boundaries: a flexible approach for segmentation applied to the car market

Laura Grigolon ()

No 15630, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Prominent features of differentiated product markets are segmentation and product proliferation blurring 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)
Date: 2021-01
New Economics Papers: this item is included in nep-com, nep-ene and nep-tre
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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 (2019) Downloads
Working Paper: Blurred boundaries: a flexible approach for segmentation applied to the car market (2017) Downloads
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