Value Dynamics in the Secondary Market: Advancing a Model for Product Line Valuation of Used Goods...
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Value Dynamics in the Secondary Market: Advancing a Model for Product Line Valuation of Used Goods Presented to the American Marketing Association – Winter
Value Dynamics in the Secondary Market: Advancing a Model for
Product Line Valuation of Used Goods Presented to the American
Marketing Association Winter Educators Conference, San Antonio,
February 14, 2015 Kashef Majid University of Mary Washington
[email protected] Cristel A. Russell American University
[email protected]
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Used Goods? Defined as the market where goods that have
previously been owned by another consumer are sold (Shulman and
Coughlan 2007) This includes refurbished products, i.e. previously
owned products repaired for resale The global market secondary
market is estimated to be in excess of $50 billion (Czaga and
Fliess 2005) 3
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Model of Valuation in the Secondary Market 4
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Hypotheses We examine factors associated with value loss when a
product moves to the secondary market. Value loss/ retention is a
function of the product line, a products ranking in the line, and
the range of prices in the line The higher a products ranking the
more value it loses when it enters the secondary market The lowest
priced product has a negative impact on the amount of value it
retains The size of the range in prices within the product line
negatively impacts the value that all products in the line retain
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Hypotheses Two Moderating Relationships 6
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Data and Empirical Context The United States auto industry in
2012 Sample consists of sales data on 1,027 different vehicles sold
in the secondary market across 106 different product lines
manufactured by 27 different automakers sold in April and May 2013
Pricing data was obtained from the NADA Official Used Car Guide,
which lists average retail prices based on actual sales of used
cars by dealers in the Eastern region of the United States As
espoused by Sullivan (1998) the main advantage of NADA used-car
prices is that they are based on market transactions and therefore
reflect car buyers actual valuations of the products 7
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Model Development We developed a hierarchical linear model
(HLM) to model the value retention of cars in the secondary market
The HLM model was most appropriate because the individual vehicles
are contained within a product line, the product line may have
disproportionate impact on the value that certain vehicles retain
The intra-class correlation was 99.58 which signals a close
clustering of Residual Values within each product line and suggests
that an OLS regression would yield misleading results (Singer 1998)
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Results 9 Fixed Estimates of Residual Value, (N = 1,027),
Dependent Variable is the Residual Value (Price in the Secondary
Market/ MSRP) VariableFixed Estimate Ranking-1.185*** (.209)
LogLPrice-.442*** (.107) LogRange-.110*** (.028)
LogRange*Ranking-.118*** (.035) LogLprice*Ranking.120* (.054)
*p