Demand Elasticity of Luxury Automobiles

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Demand Elasticity of Luxury Automobiles
In the luxury automobile market, there are many vehicles that boast high quality workmanship, luxurious appointments and powerful drivetrains. For this research paper, the midsize luxury sedan segment was chosen because most of the vehicles from the brands in this segment have similar features, power, and most importantly, price tags. The flagship models of the brands were not chosen since the features and amenities are very different from car to car to such a degree that it would be almost impossible to compare the models. The retail prices of the flagship vehicles also vary by a few thousand dollars, making a fair comparison between the models even more difficult. The midsize luxury sedan segment offers consumers a good mix of quality components and craftsmanship, luxurious amenities, and ample power for daily commuting. These vehicles are designed for consumers who want luxurious, high quality vehicles at a fair price. The vehicle chosen for this study is the all-new Lexus GS430 sedan. The Lexus' two closest competitors are the BMW 545i and the Cadillac STS V8. The vehicles chosen are with all standard equipment but the navigation system option was added to each since the Lexus comes with it already loaded. The engine and transmission options were also chosen to equally match the vehicles in power and price. Since there is no central retail location where one can purchase any brand of vehicle they want, three dealerships were surveyed for price information for each brand of vehicle included in this study. Surveying three dealerships for pricing for the same car allows us to not only see the price differences from one dealership to another but also allows us to compare the price of that vehicle with another from a totally different make. See Appendix I for the results of the survey. The vehicles chosen in this study all boasted high quality craftsmanship coupled with fine materials. The materials used in the interior of...
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