FALL/WINTER 2005-06 — Technology Analysis

A New Vehicle Choice Model Simulates Advanced Vehicles Introduction Decisions (AVID)

CTR researchers have developed a model for evaluating the market penetration potential and diffusion path of new vehicle technologies. Called the Advanced Vehicles Introduction Decisions (AVID) model, it applies a new approach by segmenting vehicle buyers as early adopters, early buyers, and late majority buyers. AVID portrays the way in which consumers change their vehicle purchase decisions as new technology vehicles move from the "risky" or "unique" phase immediately after the vehicles are first introduced in the market to the "safe" or "mainstream" phase when they begin to widely penetrate the market.

At its core, AVID uses a logit model to predict consumer preferences. Logit models use a weighted score for individual vehicle technologies and predict shares on the basis of the relative value of a technology's score. AVID employs separate consumer preference coefficients for the early and late buyers, and its algorithm causes the coefficients for one of these two groups (a minority of buyers) to vary internally as market share changes. The set of coefficients that vary is designed to initially (at the technology introduction time) represent the behavior of an early adopter consumer subgroup, and then to evolve within the model to represent that of an early buyer consumer subgroup. By simulating systemic variation in consumer preferences in conjunction with buyer groups as the market share of new technology expands, the AVID model differs from the current vehicle choice model used in the Energy Information Administration's (EIA's) National Energy Modeling System (NEMS). The current model uses a single set of constant decision coefficients that represents all buyers.

The change in consumer purchase behavior captured by AVID reflects both consumers' shifting perception of the vehicles as market shares increase and the reality that consumers who are most likely to buy newly introduced vehicles are quite different from those likely to buy mainstream vehicles. For instance, a buyer of a new, highly fuel-efficient vehicle may be (1) a consumer who drives far more miles per year than the average driver or (2) an early adopter who relishes owning a unique vehicle with brand new technology. This buyer may be less concerned about purchase price than the average buyer and may place a substantially higher value on the characteristics that make the vehicle unique — for example, its high fuel economy. AVID is designed to reflect such differences.


Test Case Growth Paths for Early and Majority Buyer Submarkets: Small Car

On the basis of the researchers' recommendations, an initial, abbreviated AVID model has been implemented, and some tests of its behavior have been completed. The consumer-preferences portion of the model provides producers with an estimate of consumer propensity to buy, or market potential, if enough advanced technology vehicles were produced to satisfy the demand. The producer introductions portion of the model simulates a cautious, lagged introduction of the new technology into the new vehicle market, smoothing out some of the fluctuations in consumer propensity to buy as the technology improves over time and as the market moves from dominance by early adopters, then early buyers, and finally (if improvements of the technology are adequate) to majority buyers. Eventually, the producers match production shares to the propensity of consumers to buy, and market share stabilizes if exogenous conditions such as oil prices remain unaltered.

For further details about AVID, refer to the full report, Suggestions for a New Vehicle Choice Model Simulating Advanced Vehicles Introduction Decisions (AVID): Structure and Coefficients (1MB pdf).

Sponsor

U. S. Department of Energy, Office of Energy Efficiency and Renewable Energy

Contacts

Dan Santini and Anant Vyas

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