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Dealer Price Discrimination in New Car Purchases: Evidence from the Consumer Expenditure Survey

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  • Goldberg, Pinelopi Koujianou

Abstract

This paper documents the variation in dealer discounts for new cars using transactions price data from the Consumer Expenditure Survey. Consumer-specific characteristics fail to explain dealer discounts, whereas model, market-specific, and purchase transaction variables (e.g., first-time purchase, trade-in, and financing through dealer) do explain them. The results contradict earlier findings of race and gender discrimination based on a controlled experiment. This contradiction is reconciled by examining the higher moments of the empirical discount distribution; while mean and median markups do not vary by race and gender, minority purchases are characterized by higher dispersion. Copyright 1996 by University of Chicago Press.

Suggested Citation

  • Goldberg, Pinelopi Koujianou, 1996. "Dealer Price Discrimination in New Car Purchases: Evidence from the Consumer Expenditure Survey," Journal of Political Economy, University of Chicago Press, vol. 104(3), pages 622-654, June.
    • Handle: RePEc:ucp:jpolec:v:104:y:1996:i:3:p:622-54
    DOI: 10.1086/262035
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    References listed on IDEAS

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    1. Goldberg, Pinelopi Koujianou, 1995. "Product Differentiation and Oligopoly in International Markets: The Case of the U.S. Automobile Industry," Econometrica, Econometric Society, vol. 63(4), pages 891-951, July.
    2. Timothy F. Bresnahan & Peter C. Reiss, 1985. "Dealer and Manufacturer Margins," RAND Journal of Economics, The RAND Corporation, vol. 16(2), pages 253-268, Summer.
    3. Ayres, Ian & Siegelman, Peter, 1995. "Race and Gender Discrimination in Bargaining for a New Car," American Economic Review, American Economic Association, vol. 85(3), pages 304-321, June.
    4. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    5. George J. Stigler & James K. Kindahl, 1970. "The Behavior of Industrial Prices," NBER Books, National Bureau of Economic Research, Inc, number stig70-1, March.
    6. Lazear, Edward P, 1986. "Retail Pricing and Clearance Sales," American Economic Review, American Economic Association, vol. 76(1), pages 14-32, March.
    7. Drew Fudenberg & Jean Tirole, 1983. "Sequential Bargaining with Incomplete Information," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 50(2), pages 221-247.
    8. Steven Salop & Joseph Stiglitz, 1977. "Bargains and Ripoffs: A Model of Monopolistically Competitive Price Dispersion," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 44(3), pages 493-510.
    9. Pashigian, B. Peter & Bowen, Brian, 1992. "Why Has the Pricing of New Cars Changed?," Working Papers 82, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    10. Anat R. Admati & Motty Perry, 1987. "Strategic Delay in Bargaining," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 54(3), pages 345-364.
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