Consumer valuation of foreign and domestic vehicle attributes: Econometric analysis and implications for auto demand

Previous models of vehicle type choice have assumed that consumer valuation of vehicle attributes was consistent across foreign and domestic vehicles. In this paper, we present a model that allows for different attribute valuations between foreign and domestic vehicles. The model was estimated using national data on households who purchased new vehicles in the fall of 1979 and the spring of 1980. The estimation results indicate the presence of a substantial difference in consumer valuation of attributes between foreign and domestic vehicles. Moreover, the results indicate that studies that ignore this difference will produce erroneous marginal rates of substitution and vehicle type choice elasticities, and will ultimately lead to a misinterpretation of household vehicle demand.