Abstract
When purchasing a car in Switzerland, consumers can consult three quality labels. First, a reliability label provides the probability that a given car will have a breakdown in the next year. Second, an energy efficiency label, based on fuel consumption and carbon dioxide emissions, ranks cars from A to G. Third, a safety label, based on crash tests, ranks cars from five to one stars. The aim of this paper is to establish whether these labels have an impact on the price of new cars in Switzerland. Using a hedonic regression model, we show that the reliability label influences the price. More precisely, a decrease by one per thousand of the breakdown’s probability increases, on average, the car price by 639 Swiss francs. For the energy efficiency and the safety labels, the hedonic model attains its limits due to collinearity issues and the question cannot be answered in a satisfactory way.
Highlights
The Swiss car market is very interesting as no domestic car manufacturers are present
A reliability label provides the probability that a given car will have a breakdown in the year
Using a hedonic regression model, we show that the reliability label influences the price
Summary
The Swiss car market is very interesting as no domestic car manufacturers are present. It provides an appealing benchmark to study the behaviour of consumers without facing a domestic bias. In this small country of about 8 million inhabitants, around 4.5 million cars are registered. Founded in 1896, the Touring Club of Switzerland (TCS) has 1.6 million members and is an inevitable actor in the Swiss automotive sector. TCS provides useful information for people who want to buy a car. They have a database containing comprehensive characteristics for the majority of car models availa-
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