Vehicle Choice Behavior and the Declining Market Share of U.s. Automakers

We develop a consumer-level model of vehicle choice to investigate the reasons behind the erosion of the U.S. automobile manufacturers’ market share during the past decade. Our model accounts for the influence of vehicle attributes, brand loyalty, product line characteristics, and dealerships on choice. We find that nearly all of the loss in market share for U.S. manufacturers can be explained by changes in the basic attributes of a vehicle: price, size, power, operating cost, and body type. During the past decade, U.S. manufacturers have improved their vehicles’ attributes but not as much as Japanese and European manufacturers have improved the attributes of their vehicles.