In this paper loyalty and competition in the US automobile market is studied, using a parameterised logit-captivity model, where the loyalty and shopping behaviour of consumers is explicitly modelled as separate functions of several explanatory variables. Specifically, the probabilities that an individual is a Loyal or a Shopper are each derived from a multinomial logit model. In an empirical application of the parameterised logit-captivity model, an extensive automobile-purchase data base, from JD Power and Associates for the year 1989, is used to determine key explanatory variables for loyalty and shopping behaviour in the US automobile market. Among the findings, the number of dealer visits and the scope of a consumer's search activities were found to be important determinants of brand loyalty. In addition, and similar to the results of previous studies on automobile demand, vehicle attributes related to cost, performance, and size were important factors in an automobile purchaser's vehicle-type choice. (A)
Abstract