research-article

Developing a used car pricing model applying Multivariate Adaptive regression Splines approach

Authors:

Jitendra Sharma,

Subrata Kumar MitraAuthors Info & Claims

Volume 236, Issue C

https://doi.org/10.1016/j.eswa.2023.121277

Published: 01 February 2024 Publication History

Abstract

Although the used car market in India is enormous, with an annual 27.1 billion USD worth of car sales, no academic study examining the pricing of Indian used cars is available. The average on-road life of cars in India is high, exceeding twenty years and pass through multiple hands. The price of old cars is also a primary determinant of the prices of new cars. The article discusses the non-linear reduction of used car prices on account of age, kilometer driven, and the number of previous owners of the cars. In addition to using the Ordinary Linear Squares (OLS), we also applied Multivariate Adaptive Regression Splines (MARS) techniques to capture non-linear price relationships with other depreciating variables. The resulting error estimation from these two methods demonstrates that the complexity of non-linear modeling using MARS significantly improves fitment accuracy.

References

[1]

Ö.S. Alp, E. Büyükbebeci, A. İşcanog, F.Y. Özkurt, P. Taylan, G.W. Weber, CMARS and GAM & CQP -modern optimization methods applied to international credit default prediction, Journal of computational and applied mathematics 235 (16) (2011) 4639–4651.

[2]

H. Andersson, The value of safety as revealed in the Swedish car market: An application of the hedonic pricing approach, Journal of Risk and Uncertainty 30 (3) (2005) 211–239.

[3]

T. Andrews, C. Benzing, The determinants of price in internet auctions of used cars, Atlantic Economic Journal 35 (1) (2007) 43–57.

[4]

S. Berry, J. Levinsohn, A. Pakes, Automobile prices in market equilibrium, Econometrica: Journal of the Econometric Society (1995) 841–890.

[5]

R.M. Bittmann, R. Gelbard, Visualization of multi-algorithm clustering for better economic decisions—the case of car pricing, Decision Support Systems 47 (1) (2009) 42–50.

[6]

V. Buskens, J. Weesie, An experiment on the effects of embeddedness in trust situations: Buying a used car, Rationality and Society 12 (2) (2000) 227–253.

[7]

M.R. Busse, C.R. Knittel, F. Zettelmeyer, Are consumers myopic? Evidence from new and used car purchases, American Economic Review 103 (1) (2013) 220–256.

[8]

J. Chen, S. Esteban, M. Shum, When do secondary markets harm firms?, American Economic Review 103 (7) (2013) 2911–2934.

[9]

P. Craven, G. Wahba, Smoothing noisy data with spline functions, Numerische mathematik 31 (4) (1978) 377–403.

[10]

A. Das, M.N. Khan, M.M. Ahmed, Non-parametric multivariate adaptive regression splines models for investigating lane-changing gap acceptance behavior utilizing Strategic Highway Research Program 2 Naturalistic Driving Data, Transportation research record 2674 (5) (2020) 223–238.

[11]

M. Engers, M. Hartmann, S. Stern, Annual miles drive used car prices, Journal of Applied Econometrics 24 (1) (2009) 1–33.

[12]

Z. Ertem, O.M. Araz, M. Cruz-Aponte, A decision analytic approach for social distancing policies during early stages of COVID-19 pandemic, Decision Support Systems 113630 (2021).

[13]

J. Friedman, Multivariate Adaptive Regression Splines, The Annals of Statistics 19 (1) (1991) 1–67. Retrieved August 16, 2021.

[14]

A. García-Santillán, V. Martínez-Rodríguez, J.C. Santana, Psychometric properties of the RMARS Scale in High School Students, European Journal of Contemporary Education 7 (1) (2018) 97–117.

[15]

D.A. Garvin, Competing on the eight dimensions of quality, Harvard Business Review 65 (November/December) (1987) 101–109.

[16]

A. Gavazza, A. Lizzeri, N. Roketskiy, A quantitative analysis of the used-car market, American Economic Review 104 (11) (2014) 3668–3700.

[17]

D. Genesove, Adverse selection in the wholesale used car market, Journal of Political Economy 101 (4) (1993) 644–665.

[18]

P.K. Goldberg, Product differentiation and oligopoly in international markets: The case of the US automobile industry, Econometrica: Journal of the Econometric Society (1995) 891–951.

[19]

P.K. Goldberg, F. Verboven, The evolution of price dispersion in the European car market, The Review of Economic Studies 68 (4) (2001) 811–848.

[20]

K. Haleem, M. Abdel-Aty, J. Santos, Multiple applications of multivariate adaptive regression splines technique to predict rear-end crashes at unsignalized intersections, Transportation research record 2165 (1) (2010) 33–41.

[21]

K. Iwata, S. Matsumoto, Use of hybrid vehicles in Japan: An analysis of used car market data, Transportation Research Part D: Transport and Environment 46 (2016) 200–206.

[22]

X. Ju, V.C. Chen, J.M. Rosenberger, F. Liu, Fast knot optimization for multivariate adaptive regression splines (MARS) using hill climbing methods, Expert Systems with Applications 171 (2021).

[23]

L.J. Kao, C.C. Chiu, C.J. Lu, C.H. Chang, A hybrid approach by integrating wavelet-based feature extraction with MARS and SVR for stock index forecasting, Decision Support Systems 54 (3) (2013) 1228–1244.

[24]

A. Kihm, C. Vance, The determinants of equity transmission between the new and used car markets: A hedonic analysis, Journal of the Operational Research Society 67 (10) (2016) 1250–1258.

[25]

S. Kılıç Depren, M.T. Kartal, Prediction on the volume of non-performing loans in Turkey using multivariate adaptive regression splines approach, International Journal of Finance & Economics 26 (4) (2021) 6395–6405.

[26]

P. Kooreman, M.A. Haan, Price anomalies in the used car market, De Economist 154 (1) (2006) 41–62.

[27]

C.J. Lu, T.S. Lee, C.M. Lian, Sales forecasting for computer wholesalers: A comparison of multivariate adaptive regression splines and artificial neural networks, Decision Support Systems 54 (1) (2012) 584–596.

[28]

Miguéis, V. L., Camanho, A., & e Cunha, J. F. (2013). Customer attrition in retailing: an application of multivariate adaptive regression splines (MARS). Expert Systems with Applications, 40(16), 6225-6232.

[29]

T. Mocanu, What Types of Cars Will We Be Driving? Methods of Forecasting Car Travel Demand by Vehicle Type, Transportation Research Record 2672 (49) (2018) 125–134.

[30]

J. Murray, N. Sarantis, Price-quality relations and hedonic price indexes for cars in the United Kingdom, International Journal of the Economics of Business 6 (1) (1999) 5–27.

[31]

L. Nurski, F. Verboven, Incumbency advantages, distribution networks and exclusivity—Evidence from the European car markets, International Journal of Industrial Organization 34 (2014) 75–79.

[32]

A. Özmen, G.W. Weber, RMARS: Robustification of multivariate adaptive regression spline under polyhedral uncertainty, Journal of Computational and Applied Mathematics 259 (2014) 914–924.

Digital Library

[33]

A. Özmen, İ. Batmaz, G.W. Weber, Precipitation modeling by polyhedral RCMARS and comparison with MARS and CMARS, Environmental Modeling & Assessment 19 (2014) 425–435.

[34]

A. Özmen, G.W. Weber, İ. Batmaz, The new robust CMARS (RCMARS) method, Vectors 1 (2010) 362–368.

[35]

N. Pal, P. Arora, P. Kohli, D. Sundararaman, S. Palakurthy, April). How much is my car worth? A methodology for predicting used cars' prices using random forest, Springer, Cham, 2018, pp. 413–422.

[36]

J. Park, M. Abdel-Aty, Safety Effects of Widening Shoulders on Rural Multilane Roads: Developing Crash Modification Functions with Multivariate Adaptive Regression Splines, Transportation Research Record 2583 (1) (2016) 34–41.

[37]

Porter, R. H., & Sattler, P. (1999). Patterns of trade in the market for used durables: Theory and evidence.

[38]

D. Purohit, Exploring the relationship between the markets for new and used durable goods: The case of automobiles, Marketing Science 11 (2) (1992) 154–167.

[39]

V. Ramachandran, S. Viswanathan, S. Gosain, The impact of online information on the purchase of certified used cars. ACR North American, Advances. (2008).

[40]

H.J. Reis, J.S. Silva, Hedonic prices indexes for new passenger cars in Portugal (1997–2001), Economic Modelling 23 (6) (2006) 890–908.

[41]

F. Salim, N.A. Abu, An s-curve model on the maximum predictive pricing of used cars, European Journal of Molecular & Clinical Medicine 7 (3) (2020) 907–921.

[42]

E. Savku, G.W. Weber, A stochastic maximum principle for a markov regime-switching jump-diffusion model with delay and an application to finance, Journal of Optimization Theory and Applications 179 (2018) 696–721.

[43]

P. Schmidt, The effect of car sharing on car sales, International Journal of Industrial Organization 71 (2020).

[44]

Tomé, A. C. L. P. (2013). The impact of macroeconomic variables on the used cars sale price (Doctoral dissertation).

[45]

G.W. Weber, I. Batmaz, G. Köksal, P. Taylan, F. Yerlikaya-Özkurt, CMARS: A new contribution to non-parametric regression with multivariate adaptive regression splines supported by continuous optimization, Inverse Problems in Science and Engineering 20 (3) (2012) 371–400.

[46]

Y. Zhang, X. Jiang, A. Haghani, B. Huang, Exploring Piecewise Linear Effects of Crash Contributing Factors with a Novel Poisson-Mixed Multivariate Adaptive Regression Splines Model, Transportation research record 2515 (1) (2015) 17–25.

[47]

A. Zussman, Ethnic discrimination: Lessons from the Israeli online market for used cars, The Economic Journal 123 (572) (2013) F433–F468.

Index Terms

Developing a used car pricing model applying Multivariate Adaptive regression Splines approach

Index terms have been assigned to the content through auto-classification.

Recommendations

Global optimization of non-convex piecewise linear regression splines

Multivariate adaptive regression spline (MARS) is a statistical modeling method used to represent a complex system. More recently, a version of MARS was modified to be piecewise linear. This paper presents a mixed integer linear program, called MARSOPT, ...
Forecasting stock price by hybrid model of cascading Multivariate Adaptive Regression Splines and Deep Neural Network
Highlights
- Accurate Stock price prediction can help mitigate the friction that exists in stock investments.
Abstract
Much of the hesitation in stock investments is due to apparent volatility about the stock price. Had there been a predictor to accurately predict the final trading price of stocks, it could be an assurance to invest in the Stock ...
A smart car control model for brake comfort based on car following

This paper demonstrates a novel car-following model focused on passenger comfort, for example, a rapid deceleration will make passengers uncomfortable. The brake comfort model of car following was set up according to the relationship between vehicle ...

Comments

Information & Contributors

Information

Published In

cover image Expert Systems with Applications: An International Journal

Expert Systems with Applications: An International Journal Volume 236, Issue C

Feb 2024

1583 pages

Issue’s Table of Contents

Elsevier Ltd.

Publisher

Pergamon Press, Inc.

United States

Publication History

Published: 01 February 2024

Author Tags

Qualifiers

Research-article

Contributors

Other Metrics

View Article Metrics

Bibliometrics & Citations

Bibliometrics

Article Metrics

0
Total Citations
0
Total Downloads

Downloads (Last 12 months)0
Downloads (Last 6 weeks)0

Reflects downloads up to 04 Oct 2024

Other Metrics

View Author Metrics

Citations

View Options

View options

Get Access

Login options

Check if you have access through your login credentials or your institution to get full access on this article.

Full Access

Get this Publication

Media

Figures

Other

Tables

View Issue’s Table of Contents