The driving force behind demand
A smooth-running economy depends on the mechanisms of demand and supply, which allow industry to make better choices and respond to society's needs more effectively. The EU-funded project 'Dynamics of automobile demand' (Dynadem) investigated consumer behaviour and choices related to purchasing cars. It contrasted consumer patterns of durable goods (e.g. cars and home appliances) with that of storable goods (e.g. supermarket items) to draw a complete picture of purchasing behaviour. The Dynadem team worked to collect data and map key patterns in order to produce a report on the subject, in addition to evaluating research and data collection methods. With respect to consumer behaviour, project members endeavoured to study the impact of imported used cars on the quality of the car stock, in addition to examining preferences for specific stocks of cars. The project produced at least two papers in this direction. The first evaluates performance of discrete choice models in estimating mark-ups, revealing that even relatively simple numerical models such as the nested logit adequately capture the mean level of mark-ups. The second paper looks at the effectiveness of feebates, representing a combination of taxes and subsidies on automobile purchases aimed at shifting consumer purchases towards more fuel-efficient vehicles. This reveals that good feebate schemes are useful in reducing emissions without burdening government finances or reducing total welfare. Dynadem produced two more papers on storable goods outlining how consumers often don't take advantage of arbitrage opportunities caused by temporary price reductions. The second looks at sales promotions that can be observed in aggregate, store-level data. More papers are in the making, offering a wealth of information on consumer behaviour that could eventually support industry and help meet the demands of society.
