Modeling purchases of new cars: an analysis of the 2014 French market

This paper analyses and compares different policy scenarios as well as discusses price elasticities and willingness to pay and to accept using revealed preference data from the French new-car market in 2014 by means of a cross-nested logit (CNL) model. We focus particularly on electric and hybrid vehicles. We use interactions between the cost (both fixed and running costs) and the household income in order to analyze the sensitivity towards different policy scenarios per income level. Results show that the willingness to pay and to accept obtained in our study are consistent with the real market conditions. We also find that the most effective scenario in order to increase the market shares of new sold electric vehicles is that of a major technological advance such as a decrease in price due to cheaper manufacturing costs and an increase in driving range, rather than a policy-based scenario. Also, the market segment that has more potential to increase the market shares of electric vehicle purchase is the middle-income level. In the paper, we discuss how to overcome the difficulties of working with revealed preference data, and propose a new method to impute the attributes of the unchosen alternatives, based on the empirical distributions observed in the data.