Friday, October 30, 2015

How Important is Design for the Automobile Value Chain?

CHO Hallie S., HASIJA Sameer, SOSA Manuel
Read the working paper
INSEAD Working Paper 2015/86/TOM

By using user generated content (UGC), specifically customer ratings, this paper disentangles the role of different dimensions of product quality in influencing consumer choice. We use a structural estimation model with endogenous prices and heterogeneous customer preferences to show that aesthetical design is the most salient factor of product quality in determining an automobile’s market share. Our results have important implications on an automobile manufacturer’s internal resource allocation strategy. We also highlight the changing role of on-line product review forums in the automobile industry’s value chain.