Cafe Case Anayslis

Problem

We believe the problem would involve the lack of efficiency seen in the fuel efficient market which was created due to the recent implementation of regulations and standards. The protagonist is the United States National Highway Traffic Safety Administration, that is implementing regulations and standards. By trying to sell fuel efficient cars without having full support from consumers and the market leads to inefficient markets. By creating and implementing standards and regulations, the markets become inefficient, whereas over time, the markets should evolve and become more efficient.

Background

a. Theoretical

There are a couple different theories that can be applied to the case Corporate Average Fuel Economy Standard 2017-2025.

• The first theory seen is 4Ms: Four-Markets Analysis for Emerging Economies. We see that the automakers are a powerbroker and oligopoly (Werker, E.). A powerbroker is monopoly or oligopoly, that market form is not very export oriented. In this case American automakers are a powerbroker because they are selling domestic product in the United States. Oligopoly is when the market only has few sellers and can influence prices more. Again in this case the American automakers are also considered an oligopoly in the United States, because there are only a few number of sellers in the market.

• Another theory that is in this case is The Use of Knowledge in Society (Friedrich, H).. In this case United States National Highway Traffic Safety Administration is assuming they have control all knowledge about having consumers full support about new fuel efficient cars. They claim “increasing energy efficiency as a win-win alternative,” fuel efficient cars prices are going to increase which will drive away consumers (Friedrich, H). Consumers will not be influenced to purchase these vehicles and the $109 billion put into technology is going to be wasted. In The Use of Knowledge in Society if there is a loss, the resources were not used at the right place and time. When a profit is made, this is the only way to put resources to best use for consumers (Friedrich, H).

b. Qualitative Data

The United States National Highway Traffic Safety Administration created new regulations called Corporate Average Fuel Economy that auto manufacturers will have to produce fuel efficient cars and lights trucks with their 2017-2025 models. The agencies sees fuel efficient cars as a “win-win” situation for all consumers. The current policy is that if the minimum fuel efficient vehicles did not meet the required numbers the automotive makers were have to pay a penalty.

c. Quantitative Data

The current regulations and standards are made with auto makers that produce 90%