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Lihua Chen. Hedonic price model --- an analysis of the U.S. automobile market Dr. Offodile/ Dr. Patuwo http://mismain.bsa.kent.edu/Users/WorkingPapers/chen.pdf. Purpose. To construct hedonic price model for automobiles To find out what factors/attributes contribute to the price of a car.
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Lihua Chen Hedonic price model --- an analysis of the U.S. automobile market Dr. Offodile/ Dr. Patuwo http://mismain.bsa.kent.edu/Users/WorkingPapers/chen.pdf
Purpose • To construct hedonic price model for automobiles • To find out what factors/attributes contribute to the price of a car
Market Investigation • Important factors/attributes • Safety • Fuel efficiency • Quality • Speed and status • Comfort
Data Source • Sample data are from Ward’s automotive yearbook • www.NHTSA.gov • Samples are only those models with the sales of vehicles more than 10,000
Methodology • Hedonic price model (HPM) for automobiles • Assumption: product price can be viewed as a function of its characteristics • data: both quantitative and qualitative attributes • HPM has been used extensively to model pricing of durable products
Country of Origin Drive type Curb weight Cyl PWR Inj Contrl ABS MPG Trnsmsn Dependent variables
Hedonic price model • Regression model
t statistics in parentheses: * means and ** .
Outcome of the model • Adjusted R-Squares are around 0.90 • Significant variables: • ABS • Weight • Power • control
Results and Analysis • The outcomes of all three years are consistent with adjusted R-square=0.90 • Highlights: Speed, comfort and safety are important determinant of vehicle price • Country of origin is not significant • Fuel economy does not contribute to the price.