Indeed, for a sector where rapid changes of quality arise, standard indices like the Laspeyres or Paasche indices should be used with caution when analysing the evolution of prices.īesides indices, hedonic pricing has also been extensively used to estimate the value of a car’s attributes. For instance, proposed a hedonic approach to consumer theory and developed an equilibrium theory based on hedonic prices.įor cars, hedonic price indices have been widely used as they clearly outperform standard indices. Soon, hedonic approaches were used in economic models. In that decade, researchers like Griliches, with his seminal paper, popularised the method. Later, in the 1960s, the advent of the computer permitted the expansion of the method. In this original paper, probably for the first time, the adjective “hedonic” is used to describe the method. Though Haas seems to have been the first to use a hedonic approach, Court is generally considered as the pioneer of hedonic pricing. It permits, among other things, estimating the value of each single characteristic of the product, or, in other words, each single attribute. Hedonic pricing supposes that the price of a product can be explained by its characteristics and has become a popular method among researchers. The aim of this paper is to establish, using a hedonic approach, whether these three quality labels have an impact on the price of new cars. This safety rating is determined from different tests, including crash tests. For this label, the safest cars are rated with five stars and the safety decreases with the number of stars. The third label is the five-star safety rating system provided, since 1997, by the independent organization European New Car Assessment Program (Euro NCAP). This label is based on fuel consumption and carbon dioxide emissions. The second label is the energy efficiency label introduced by the Swiss Federal Office of Energy (SFOE) in 2003 that ranks cars from A, the best, to G, the worst. This label can be seen as the European equivalent of the American Car Reliability index constructed by Consumer Reports. As the database is huge, this index is extremely reliable. More precisely, this index is the probability for a car of a given model and a given age to have a breakdown in the next year. ADAC offers to more than 18 million members breakdown assistance and, from this, compiles breakdown statistics each year and publishes reliability indices for car models. The first one is a reliability label and is computed by the German automobile club Allgemeiner Deutscher Automobil-Club (ADAC). They also contribute to disseminating three quality labels that guide consumers in their choice. These tests are greatly prized by people facing the decision of choosing a new car. Furthermore, they also perform independent tests for most of them. For instance, they have a database containing comprehensive characteristics for the majority of car models available in Switzerland. Among others, TCS provides useful information for people who want to buy a car. Founded in 1896, the Touring Club of Switzerland (TCS) has 1.6 million members and is an inevitable actor in the Swiss automotive sector. In this small country of about 8 million inhabitants, around 4.5 million cars are registered. It provides therefore an appealing benchmark to study the behaviour of consumers without facing a domestic bias. The Swiss car market is very interesting as no domestic car manufacturers are present.
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