Considering Monopoly Maintenance Cost for an Automobile Purchase in China: A DEA-Based Approach

With the fast growing economy, China has become the biggest automobile market in the world. Many Chinese families buy automobiles to promote individual wellbeing and facilitate the convenience of lives. Automobile purchase has become a general and important decision for a Chinese family. However, it is always difficult to make a decision on the automobile purchase that balance the automobiles performance and its cost. Moreover, the automobile maintenance market in China is monopolistic. Thus, the maintenance cost is a significant consideration in automobile purchase decision. This paper employs the concept of data envelopment analysis (DEA) to measure cost performance of the automobile with considering the monopoly maintenance cost. The RCA (ratio of the total price of accessories of an automobile to the price of the automobile) 100 index system is used to represent the maintenance cost of each automobile. The structure of the automobile maintenance market can be reflected with including the RCA 100 index system in the performance evaluation. Results of the case study of 28 automobiles in China verify the necessity of considering the maintenance cost in automobile purchase decision.