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Who Loses when Prices are Negotiated? An Analysis of the New Car Market
Author(s) -
Chandra Ambarish,
Gulati Sumeet,
Sallee James M.
Publication year - 2017
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/joie.12125
Subject(s) - negotiation , database transaction , economics , variation (astronomy) , price dispersion , dispersion (optics) , demographic economics , labour economics , microeconomics , political science , physics , optics , astrophysics , computer science , law , programming language
We establish that there are large and persistent differences in final transaction prices for identical new cars, and that demographic characteristics explain at least 20% of the observed variation. Older consumers perform progressively worse in negotiations, and the age premium is greater for women than for men. Our results suggest that the complex nature of vehicle transactions leads to price dispersion in this market, and that the worst performing groups—older women—have the lowest rates of market participation. We conjecture that the results are driven by the sharp increases in women's education and labor force participation in recent decades.