Service competition and product quality in the U.S. Automobile industry

• Autores: Jose A. Guajardo, Morris A. Cohen, Serguei Netessine
• Localización: Management science: journal of the Institute for operations research and the management sciences, ISSN 0025-1909, Vol. 62, Nº. 7, 2016, págs. 1860-1877
• Idioma: inglés
• Texto completo no disponible (Saber más ...)
• Resumen

  • We study the impact of service attributes (warranty length, after-sales service quality) on consumer demand in the U.S. automobile industry, examining the presence of complementarities/substitution between service attributes and product quality. Our results estimate a median willingness to pay for one year of a warranty of approximately $850, which is equivalent to 3.1% of the median vehicle price in our sample. We find that, for a car with median characteristics, the effect on consumer utility of a 1% price decrease is equivalent, all else being equal, to increasing product quality by 2.2%, and is in turn equivalent to increasing the warranty length by 8%. Our results also indicate that service attributes play a compensatory role with respect to product quality; i.e., the impact of warranty length and service quality on demand increases when product quality decreases. Conversely, both service metrics are complementary with respect to demand; i.e., the better the service quality, the higher the marginal effect of longer warranties. Our results thus imply that, in our period of analysis, warranties played a more important role for American firms than for foreign firms, consistent with the fact that American manufacturers exhibited lower product quality and higher service quality than non-American firms.