The differential effects of time and usage on the brand premiums of automobiles

Eyal Biyalogorsky, Amir Heiman, Eitan Muller

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

We investigate how the status and functional benefits of cars’ brands lose value over time. Theoretically, we show that brands with a higher status, or that appeal to status-conscious consumers, exhibit steeper price decline over time. Empirically, we take advantage of the phenomenon of twin cars – pairs of car models that are nearly identical from a structural and mechanical standpoint, but that are sold under differing brand names – to disentangle the effects of physical wear and tear, which should impact both the premium brand and the corresponding standard brand similarly; and time-related price decline, which should affect each brand differently. The main result is that a premium car's price declines much faster than that of the corresponding standard car (controlling for physical condition, mileage, and initial price). This result suggests that status declines faster than do functional attributes, and status seekers tend to replace their cars earlier.

Original languageAmerican English
Pages (from-to)212-226
Number of pages15
JournalInternational Journal of Research in Marketing
Volume39
Issue number1
DOIs
StatePublished - Mar 2022

Bibliographical note

Publisher Copyright:
© 2021 The Author(s)

Keywords

  • Price decline
  • Status
  • Twin cars

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