Based on the data for Taiwan's automobile industry, we explore consumers' preferences over various automobile characteristics and responses to increasing fuel expenditures. We find that while consumers prefer more fuel efficient automobiles, the preference for higher power is insignificant when endogeneity issues are fully accounted for, which reflects for a small and crowded country with strict speed limits, having a high-performance automobile is less attractive-a very different result compared to those of existing studies, which are mostly focused on the U.S. market. We also find that while higher oil prices discourage automobile sales, consumers prefer heavier automobiles, which may have better ride quality and safety features. Moreover, since for an average consumer in Taiwan, purchasing an automobile constitutes a higher expenditure share than that of a U.S. consumer, the automobile demand in Taiwan might be more elastic, and our findings confirm this argument.
Jin-Long Liu, National Central University, Taiwan
Yu-Lin Liu, National Central University, Taiwan
Henry Chen, MIT, United States
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