Demand and cost impacts of the 2 mm technology program in the US motor-vehicle market

Authors: Biderman, Ciro; Polenske, Karen; Rockler, Nicolas

Source: Economics of Innovation and New Technology, Volume 14, Number 7, October 2005 , pp. 637-655(19)

Publisher: Routledge, part of the Taylor & Francis Group

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Abstract:

We assess the impact on demand and producers' costs of a new technology implemented in the US auto industry, the 2 mm program. This is a fascinating case partially because of the unique collaboration among public agencies and a consortium of manufacturers and universities. Using a type of hedonic price model for demand, we show that the new technology was responsible for a short-lived increase in demand for vehicles produced by US automakers at increased producers' costs. Firms that refused to participate in the consortium attained smaller net gains implementing the technology independently. Overall, our approach differs from that of previous analysts in that we (1) separate demand from supply, (2) employ a comprehensive vehicle database, spanning 1981–1998 data, including data on virtually all vehicle models sold in the USA, as well as data on plants' and producers' technology characteristics, and (3) rely on sales and production data rather than plant data. Also, we quantify the cost of not participating in the consortium.

Keywords: Automobiles; Hedonics; Research consortia; Body-in-white technology

Document Type: Research article

DOI: http://dx.doi.org/10.1080/10438590500117537

Affiliations: 1: Multiregional Research Team, Department of Urban Studies and Planning, Room 9-535, MIT, Cambridge, MA, 02139, USA

Publication date: 2005-10-01

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