【经管院每周系列讲座第316期】 China’s Vehicle Quota System and Consumer Choices of Automobile: A Perspective of Sunk Cost
【经管院每周系列讲座第316期】 China’s Vehicle Quota System and Consumer Choices of Automobile: A Perspective of Sunk Cost Title: China’s Vehicle Quota System and Consumer Choices of Automobile: A Perspective of Sunk CostSpeaker: 李汛(Dr.) ,Wuhan UniveristyHost: Wei Wang, Associate professor, RIEMTime: 14:00-15:30, Mar. 3, FridayVenue: H501, Liulin CampusAbstract: The effect of vehicle quota system (VQS) such as lottery in Beijing and auction in Shanghai is under-analyzed. This paper investigates the effects of VQS on consumer choices of automobile empirically and theoretically. Using a huge data set with more than 60 million observations, our empirical analysis based on the mixed logit model show that Beijing’s lottery and Shanghai’s auction both stimulate demand of higher-price automobile. However, different from Beijing, the effect of Shanghai’s auction is dependent with individual income. Individuals with higher income are more likely to be affected by the auction. We also propose a theoretical model extending Baliga and Ely (2011) to explain our empirical findings which is compatible for both lottery and auction. Our theoretical model consistently reveals that sunk cost in the Beijing’s lottery makes consumer prefer automobile with higher price. While Shanghai’s auction affect consumer’s choice ambiguously, depending on individual income.