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Dealer and Manufacturer Margins

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  • Timothy F. Bresnahan
  • Peter C. Reiss

Abstract

When retail dealers carry only one product line, the size of the dealer margin is crucial in the success of both the manufacturer and the dealer. This article proposes a successive monopoly model of patterns in exclusive dealer and manufacturer margins across a product line. The predictions of the model then are compared with the pricing practices of a major U.S. automobile manufacturer and its dealers. The data support a special case of our theory. Our analysis also indicates that we cannot reject the hypothesis that the retail demand curves for these models are (locally) linear. Finally, we use the margin data to provide updated evidence on the extent to which retail prices depart from list price.

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Bibliographic Info

Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 16 (1985)
Issue (Month): 2 (Summer)
Pages: 253-268

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Handle: RePEc:rje:randje:v:16:y:1985:i:summer:p:253-268

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Cited by:
  1. Adam Copeland & Wendy Dunn & George Hall, 2005. "Prices, Production and Inventories over the Automotive Model Year," NBER Working Papers 11257, National Bureau of Economic Research, Inc.
  2. Huang, Kwei-Long & Kuo, Chia-Wei & Lu, Ming-Lun, 2014. "Wholesale price rebate vs. capacity expansion: The optimal strategy for seasonal products in a supply chain," European Journal of Operational Research, Elsevier, Elsevier, vol. 234(1), pages 77-85.
  3. Adachi, Takanori & Ebina, Takeshi, 2014. "Double marginalization and cost pass-through: Weyl–Fabinger and Cowan meet Spengler and Bresnahan–Reiss," Economics Letters, Elsevier, Elsevier, vol. 122(2), pages 170-175.
  4. Ferrari, Stijn & Verboven, Frank, 2010. "Vertical Control of a Distribution Network - An Empirical Analysis of Magazines," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7832, C.E.P.R. Discussion Papers.
  5. Benjamin A. Olken & Patrick Barron, 2007. "The Simple Economics of Extortion: Evidence from Trucking in Aceh," NBER Working Papers 13145, National Bureau of Economic Research, Inc.
  6. Rebecca Hellerstein & Sofia Berto Villas-Boas, 2006. "Arm's-length transactions as a source of incomplete cross-border transmission: the case of autos," Staff Reports, Federal Reserve Bank of New York 251, Federal Reserve Bank of New York.
  7. Rebecca Hellerstein, 2004. "Who bears the cost of a change in the exchange rate? The case of imported beer," Staff Reports, Federal Reserve Bank of New York 179, Federal Reserve Bank of New York.
  8. Rebecca Hellerstein, 2006. "A decomposition of the sources of incomplete cross-border transmission," Staff Reports, Federal Reserve Bank of New York 250, Federal Reserve Bank of New York.
  9. Walter A Cont, 2001. "Essays on Contract Design: Delegation and Agency Problems, and Monitoring Under Collusion," Levine's Working Paper Archive 625018000000000122, David K. Levine.
  10. Rebecca Hellerstein, 2004. "Who Bears the Cost of a Change in the Exchange Rate?," Econometric Society 2004 North American Summer Meetings, Econometric Society 589, Econometric Society.
  11. Maura P. Doyle, 1997. "The effects of interest rates and taxes on new car prices," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 1997-38, Board of Governors of the Federal Reserve System (U.S.).
  12. Benoot, W. & Brueckner, J.K. & Proost, S., 2013. "Intercontinental-airport regulation," Transportation Research Part B: Methodological, Elsevier, Elsevier, vol. 52(C), pages 56-72.

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