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Analyzing U.S. Automobile Prices through a Hedonic Price Model

This paper constructs a hedonic price model (HPM) to explore factors affecting automobile prices in the U.S. The study utilizes sampled data from Ward’s automotive yearbook and focuses on cars with sales exceeding 10,000 units. Key attributes examined include safety, comfort, speed, and quality. The model shows an adjusted R-squared value around 0.90, supporting the significance of comfort, safety, and speed in determining vehicle prices. Interestingly, fuel economy and country of origin did not significantly influence prices.

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Analyzing U.S. Automobile Prices through a Hedonic Price Model

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  1. 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

  2. Purpose • To construct hedonic price model for automobiles • To find out what factors/attributes contribute to the price of a car

  3. Market Investigation • Important factors/attributes • Safety • Fuel efficiency • Quality • Speed and status • Comfort

  4. 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

  5. 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

  6. Country of Origin Drive type Curb weight Cyl PWR Inj Contrl ABS MPG Trnsmsn Dependent variables

  7. Hedonic price model • Regression model

  8. t statistics in parentheses: * means and ** .

  9. Outcome of the model • Adjusted R-Squares are around 0.90 • Significant variables: • ABS • Weight • Power • control

  10. 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.

  11. Any Question?

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