Pricing and Production Flexibility: An Empirical Analysis of the US Automotive Industry

Loading...
Thumbnail Image
Penn collection
Finance Papers
Degree type
Discipline
Subject
empirical operations management
flexibility
pricing
automotive industry
Business
Business Administration, Management, and Operations
Finance and Financial Management
Funder
Grant number
License
Copyright date
Distributor
Related resources
Author
Moreno, Antonio
Terwiesch, Christian
Contributor
Abstract

We use a detailed data set from the U.S. auto industry spanning from 2002 to 2009 and a variety of econometric methods to characterize the relationship between the availability of production mix flexibility and firms’ use of responsive pricing. We find that production mix flexibility is associated with reductions in observed manufacturer discounts, resulting from the increased ability to match supply and demand. Under the observed market conditions, mix flexibility accounts for substantial average savings by reducing price discounting by approximately 10% of the average industry discount. We test three supplementary hypotheses and find that the reduction in discounts for vehicles manufactured at flexible plants is (1) higher for higher demand uncertainty, (2) higher for vehicles coproduced with vehicles that belong to a different segment, and (3) lower in situations with higher local competition.

Advisor
Date Range for Data Collection (Start Date)
Date Range for Data Collection (End Date)
Digital Object Identifier
Series name and number
Publication date
2015-01-01
Journal title
Manufacturing & Service Operations Management
Volume number
Issue number
Publisher
Publisher DOI
Journal Issue
Comments
Recommended citation
Collection