Template-Type: ReDIF-Paper 1.0
Title: Blurred Boundaries: A Flexible Approach for Segmentation Applied to the Car Market
Author-Name: Laura Grigolon
Author-Email: laura.grigolon@uni-mannheim.de

Classification-JEL: D11, D12, L62, M3
Keywords: 

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.


Note: 
Length: 45
Creation-Date: 2019-09
Revision-Date: 
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp127
Handle: RePEc:bon:boncrc:CRCTR224_2019_127