Econometrica: Apr, 1977, Volume 45, Issue 3

A Comparison of Automobile Demand Equations

https://doi.org/0012-9682(197704)45:3<683:ACOADE>2.0.CO;2-K
p. 683-702

Alan C. Hess

This paper reports the testing of hypotheses concerning: (i) whether the household is better viewed as planning over a single-period versus a multiperiod horizon; (ii) whether the household is better viewed as planning in a single-asset or a multiasset framework; (iii) the relative importance of substitution and wealth effects as sources of change in the stock demand for automobiles. The findings are that a multiperiod, multiasset model best describes stock demand, that the separation theorem which implies a zero wealth effect is rejected, and that substitution effects are seven times more important than wealth effects.