We develop a structural model of vehicle demand, pricing, and advertising that allows age-specific heterogeneity in preferences, price sensitivities, and advertising responses. The model is estimated using product-level and age-specific data on vehicle sales and advertising in France from 2012 to 2021. We use the estimated model to evaluate firms’ pricing and advertising responses to alternative advertising policies. Counterfactual simulations suggest that banning advertising for non-electric and non-hybrid vehicles weighing more than 1,500 kilograms offers the best-targeted policy, generating substantial welfare gains and reductions in CO2 emissions and vehicle weight comparable to a complete advertising ban.
Jiekai Zhang is a lecturer in economics at the University of Southampton.
https://www.southampton.ac.uk/people/66wbrg/doctor-jiekai-zhang