. (15 points) The automobile makers Mercedes-Benz and Kia were considering enter
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Question
. (15 points) The automobile makers Mercedes-Benz and Kia were considering entering a devel- oping country. Prior to entering, a survey of consumers in this developing country indicated that consumers prefer Mercedes-Benz automobiles over Kia automobiles. However, after the two au- tomobile makers entered the country and began sales of their vehicles, consumers flocked to Kia dealerships. How can you explain this apparent paradox? (Hint: think about the data needed to infer a consumer's optimal bundle choice and the data provided here.)Explanation / Answer
The paradox can be explained by analysing the sample data that was collected to understand the consumer's preferences. It is highly likely that the sample collected was biased as it appears that the respondents who had a liking for Mercedes Benz car were chosen. It is equally likely that only a small sample was collected from few geographical location whereas for this study the samples should have been collected from different geographical regions of the developing country and should have included a diverse set of people in the sample.
Thus the error in sample collection led to this paradoxical situation.
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