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Why do Pre-tax Car Prices Differ so Much Across European Countries?

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  • Flam, Harry
  • Nordström, Håkan

Abstract

The European car market is segmented by regulatory measures that support price discrimination by manufacturers and make consumer arbitrage difficult and costly. In a sample covering 43 models making up 80% of car sales in 11 countries in 1989-92, we find that the average standard deviation of pre-tax prices across markets is 14%. The difference between the maximum and minimum price is typically about 50% of the average price. The price discrimination seems to be driven largely by taxes, tariffs and import quotas. For example, a quota raises the pre-tax price of the average Japanese car by 12% and of the average competing European car by 7%.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1181.

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Date of creation: May 1995
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Handle: RePEc:cpr:ceprdp:1181

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Related research

Keywords: Market Segmentation; Price Discrimination; Voluntary Export Restraint;

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Cited by:
  1. Francois, Joseph & Wooton, Ian, 2007. "Market structure and market access," Policy Research Working Paper Series 4151, The World Bank.
  2. repec:dgr:uvatin:2004050 is not listed on IDEAS
  3. Francois, Joseph & Wooton, Ian, 2005. "Market Structure in Services and Market Access in Goods," CEPR Discussion Papers 5135, C.E.P.R. Discussion Papers.
  4. Einar Bowitz & Taran Fæhn & Leo Grünfeld & Knut Moum, 1997. "Can a Wealthy Economy Gain from an EU Membership? Adjustment Costs and Long Term Welfare Effects of Full Integration—The Norwegian Case," Open Economies Review, Springer, vol. 8(3), pages 211-231, July.
  5. Adolfson, Malin, 1999. "Swedish Export Price Determination: Pricing to Market Shares?," Working Paper Series 96, Sveriges Riksbank (Central Bank of Sweden).
  6. Friberg, Richard, 1997. "Should the core fear the outs? Price setting practices and international monetary transmission," Working Paper Series in Economics and Finance 203, Stockholm School of Economics.

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