Vehicle Quota System and Its Impact on the Chinese Auto Markets: A Tale of Two Cities

39 Pages Posted: 16 Jul 2013 Last revised: 21 Jul 2013

See all articles by Junji Xiao

Junji Xiao

The Chinese University of Hong Kong (CUHK) - Department of Decision Sciences & Managerial Economics

Xiaolan Zhou

Shanghai University of Finance and Economics - School of Economics

Wei‐Min Hu

National Chengchi University (NCCU)

Date Written: July 21, 2013

Abstract

This paper investigates the impact of the unique vehicle quota system of Shanghai, China, on two Chinese markets of passenger vehicles. The empirical findings suggest that conditional on purchase of the license quota, consumers intend to purchase high-end vehicles with high price since the customers who can afford the license quota are less price sensitive. Hence, this system puts the manufacturers producing low end cars at a disadvantage.

Keywords: Chinese auto industry, Vehicle quota system, counterfactual analysis, discrete choice model

JEL Classification: C25, H11, L16

Suggested Citation

Xiao, Junji and Zhou, Xiaolan and Hu, Wei‐Min, Vehicle Quota System and Its Impact on the Chinese Auto Markets: A Tale of Two Cities (July 21, 2013). Available at SSRN: https://ssrn.com/abstract=2294217 or http://dx.doi.org/10.2139/ssrn.2294217

Junji Xiao

The Chinese University of Hong Kong (CUHK) - Department of Decision Sciences & Managerial Economics ( email )

Shatin, N.T.
Hong Kong

Xiaolan Zhou (Contact Author)

Shanghai University of Finance and Economics - School of Economics ( email )

777 Guoding Road
Shanghai, 200433
China

Wei‐Min Hu

National Chengchi University (NCCU) ( email )

No. 64, Chih-Nan Road
Section 2
Wenshan, Taipei, 11623
Taiwan

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