Exploring the price efficiency within automotive markets – An application of data envelopment analysis

Pingjun Jiang
La Salle University

INTRODUCTION

There has been considerable change in the automotive industry. Product life cycles have shortened, internal competition has increased and competition has become a worldwide phenomenon. The 'product' is becoming increasingly important and strategic in corporate marketing mixes in this new context; therefore, the product development process ensures that car models perceived of higher value will fulfil the needs of the highest possible number of customers more satisfactorily and rapidly. Car manufacturers are required to address increasingly specific market needs while still providing value, in order to ensure success and thereby maintain or improve their position with regard to competitors. Substantial price dispersion has been found or implied in a large number of studies in actual retail automotive markets (examples are Benham 1972; Pratt et al. 1979; Maynes & Assum 1982; Dahlby & West 1986; Shugan 1988). For the simple reason that consumers are assumed to maximise their utility, this is strong evidence that consumers are less than perfectly informed about the alternatives that are available in consumer markets (see, for example, Oxenfeldt 1950; Bettman 1979; Beals et al. 1981; Maynes & Assum 1982).