Blurred boundaries: A flexible approach for segmentation applied to the car market

Prominent features of differentiated product markets are segmentation and proliferation blurring the boundaries between segments. I develop a tractable demand model, Ordered Nested Logit, which allows for asymmetric substitution apply model to automobile market where segments ordered from small luxury. find that consumers, when substituting outside their vehicle segment, more likely switch neighboring segment. Accounting such matters evaluating impact new introduction or effect subsidies on fuel‐efficient cars.