Why do consumers still purchase GM cars? *

According to this working paper by professors Susan Helper and Rebecca Henderson in the Harvard Business Review, GM’s market share in the US fell from 62.6% to 19.8% between 1980 and 2009 … In other words, a large fraction of US consumers are still buying GM cars. But why? Do GM-loyal consumers refute the “rational choice” model of economics? As Tyler Cowen noted yesterday in this post on his top-notch Marginal Revolution blog, “The market here is working, but oh so slowly. I would like to see behavioral economics papers on why so many people continued to buy General Motors (and here I mean the standard cars) for as long as they did.”

* By the way, the same question can be asked about Internet users who still rely on Yahoo, Hotmail, or AOL for their email instead of switching to Gmail.  In either case (automobiles or email accounts), do such simple explanations as “path dependence”, brand loyalty, or advertising provide satisfactory answers?

About F. E. Guerra-Pujol

When I’m not blogging, I am a business law professor at the University of Central Florida.
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2 Responses to Why do consumers still purchase GM cars? *

  1. TheProfessorsWife says:

    What is “path dependence”? Also maybe the reason has something to do with brand identity and brand loyalty.

  2. enrique says:

    The idea of path dependence comes from evolutionary biology but has been applied to many business scenarios, like the dominance of VHS over the vastly superior Beta technology. Look it up!

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