Application of a Threshold Regression Model to Household Purchases of Automobiles

The threshold regression assumes that the value of the dependent variable remains fixed until "the concerted action of the independent variables and the error term induces it to overcome its reaction threshold." The existence of reaction thresholds in the purchasing of private cars has been discussed and analyzed. Among the main explanatory variables used in micro-economic studies, the most significant appear to be income, household composition, age and education of head, number of earners, number and age of cars, value of stock of cars previously held, liquid assets, net worth, debts and place of residence. The independent variables finally retained in the present study are "permanent income," education of head household and number of children. To summarize, income appears to be the most important variable affecting car purchases by households. There are no doubt other social and demographic characteristics of households which bear on this phenomenon, but the nature of these variables as well as the mechanisms through which they operate have not been sufficiently investigated and are not yet sufficiently well known to permit us to detect their effect very clearly, in statistical investigations.