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Determinants of Automobile Demand and Implications for Hybrid-Electric Market Penetration

By Sruthi M Thatchenkery

This paper investigates market receptivity to hybrid-electric vehicles by using cross-sectional data on vehicle registrations to estimate demand functions for the overall market, the hybrid market, and specialized vehicle segments. Each specification features intrinsic product attributes such as fuel efficiency and horsepower, while the hybrid specification also includes external influences on demand, such as government incentives, demographics, and environmentalism. I find that a preference for greater fuel efficiency is fairly consistent across most markets, but is typically overshadowed by stronger affinities for horsepower and weight. Certain external influences, such as convenience-based incentives and environmentalism, boost explanatory power but do not outweigh the effects of vehicle attributes.
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Advisor: Arie Beresteanu

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