Case Study on Honda Essay
Consumer Learning and Hybrid Vehicle Adoption
Garth Heutel
University of North Carolina at Greensboro Harvard Kennedy School 2010
Erich Muehlegger
M-RCBG Faculty Working Paper Series | 2010-04
Mossavar-Rahmani Center for Business & Government Weil Hall | Harvard Kennedy School | www.hks.harvard.edu/mrcbg
The views expressed in the M-RCBG Working Paper Series are those of the author(s) and do not necessarily reflect those of the Mossavar-Rahmani Center for Business & Government or of Harvard University. M-RCBG Working Papers have not undergone formal review and approval. Papers are included in this series to elicit feedback and encourage debate on important public policy challenges. Copyright belongs to the author(s). Papers may be downloaded for personal use only.
Consumer Learning and Hybrid Vehicle Adoption Garth Heutel Erich Muehlegger April 2010 Abstract
We study the diffusion of hybrid vehicles among consumers. Using data on sales of 11 different models over seven years, we identify the effect of the penetration rate – total cumulative hybrid sales per capita – on new hybrid purchases. The penetration rate significantly affects new purchases, and the effect differs by hybrid model. In particular, we find a positive diffusion effect from the Toyota Prius and a negative diffusion effect from the Honda Insight, with elasticities of 0.23 to 0.85 for the Prius and –0.08 to –0.32 for the Insight. This finding is consistent with our model of model–specific learning along with anecdotal evidence that early Insight models were perceived to be of lower quality than Prius models. Higher Insight penetration rates gave a negative signal about hybrid quality and inhibited rather than promoted hybrid adoption. The findings are relevant for policy designed to promote new technologies. JEL Codes: Q55, O33, D83
Garth Heutel Department of Economics University of North Carolina at Greensboro PO Box 26165 Greensboro, NC 27402 gaheutel@uncg.edu Erich
Garth Heutel
University of North Carolina at Greensboro Harvard Kennedy School 2010
Erich Muehlegger
M-RCBG Faculty Working Paper Series | 2010-04
Mossavar-Rahmani Center for Business & Government Weil Hall | Harvard Kennedy School | www.hks.harvard.edu/mrcbg
The views expressed in the M-RCBG Working Paper Series are those of the author(s) and do not necessarily reflect those of the Mossavar-Rahmani Center for Business & Government or of Harvard University. M-RCBG Working Papers have not undergone formal review and approval. Papers are included in this series to elicit feedback and encourage debate on important public policy challenges. Copyright belongs to the author(s). Papers may be downloaded for personal use only.
Consumer Learning and Hybrid Vehicle Adoption Garth Heutel Erich Muehlegger April 2010 Abstract
We study the diffusion of hybrid vehicles among consumers. Using data on sales of 11 different models over seven years, we identify the effect of the penetration rate – total cumulative hybrid sales per capita – on new hybrid purchases. The penetration rate significantly affects new purchases, and the effect differs by hybrid model. In particular, we find a positive diffusion effect from the Toyota Prius and a negative diffusion effect from the Honda Insight, with elasticities of 0.23 to 0.85 for the Prius and –0.08 to –0.32 for the Insight. This finding is consistent with our model of model–specific learning along with anecdotal evidence that early Insight models were perceived to be of lower quality than Prius models. Higher Insight penetration rates gave a negative signal about hybrid quality and inhibited rather than promoted hybrid adoption. The findings are relevant for policy designed to promote new technologies. JEL Codes: Q55, O33, D83
Garth Heutel Department of Economics University of North Carolina at Greensboro PO Box 26165 Greensboro, NC 27402 gaheutel@uncg.edu Erich
References: Notes: Left-hand axis values are total cumulative sales of Insights, Priuses, and all hybrids in the United States, 2000 Q1 – 2006 Q4. The scale on the right-hand axis is the cumulative Prius sales as a fraction of cumulative hybrid sales.