Dealer Pricing of Consumer Credit
AbstractInterest rates on consumer lending are lower when funds are tied to purchase of a durable good than when they are made available on an unconditional basis. Further, dealers often choose to bear the financial cost of their customers' credit purchases. This paper interprets this phenomenon in terms of monopolistic price discrimination. We characterize consumers' intertemporal consumption decisions and the dealer's pricing incentives when the consumers' unconditional lending and borrowing rate as well as the internal rate of return of the durable purchase differ. Our empirical analysis offers considerable support for the assumptions and implications of our theoretical perspective.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Royal Economic Society in its series Royal Economic Society Annual Conference 2002 with number 24.
Date of creation: 29 Aug 2002
Date of revision:
Contact details of provider:
Postal: Office of the Secretary-General, School of Economics and Finance, University of St. Andrews, St. Andrews, Fife, KY16 9AL, UK
Phone: +44 1334 462479
Web page: http://www.res.org.uk/society/annualconf.asp
More information through EDIRC
Other versions of this item:
- Giuseppe Bertola & Stefan Hochguertel & Winfried Koeniger, 2005. "Dealer Pricing Of Consumer Credit ," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(4), pages 1103-1142, November.
- Bertola, Giuseppe & Hochguertel, Stefan & Koeniger, Winfried, 2002. "Dealer Pricing of Consumer Credit," IZA Discussion Papers 440, Institute for the Study of Labor (IZA).
- Bertola, Giuseppe & Hochguertel, Stefan & Koeniger, Winfried, 2002. "Dealer Pricing of Consumer Credit," CEPR Discussion Papers 3160, C.E.P.R. Discussion Papers.
- D10 - Microeconomics - - Household Behavior - - - General
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
- G2 - Financial Economics - - Financial Institutions and Services
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-07-08 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Spence, A Michael, 1977. "Consumer Misperceptions, Product Failure and Producer Liability," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 561-72, October.
- Rob Alessie & Stefan Hochguertel & Guglielmo Weber, 2005.
"Consumer Credit: Evidence From Italian Micro Data,"
Journal of the European Economic Association,
MIT Press, vol. 3(1), pages 144-178, 03.
- Alessie, Rob & Devereux, Michael P. & Weber, Guglielmo, 1997.
"Intertemporal consumption, durables and liquidity constraints: A cohort analysis,"
European Economic Review,
Elsevier, vol. 41(1), pages 37-59, January.
- Alessi, R & Michael Devereux & Guglielmo Weber, 1993. "Intertemporal consumption, durables and liquidity constraints: a cohort analysis," IFS Working Papers W93/07, Institute for Fiscal Studies.
- Pissarides, Christopher A, 1978. "Liquidity Considerations in the Theory of Consumption," The Quarterly Journal of Economics, MIT Press, vol. 92(2), pages 279-96, May.
- Orazio P. Attanasio, 1994.
"The Intertemporal Allocation of Consumption: Theory and Evidence,"
NBER Working Papers
4811, National Bureau of Economic Research, Inc.
- Attanasio, Orazio P., 1995. "The intertemporal allocation of consumption: theory and evidence," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 42(1), pages 39-56, June.
- F. Thomas Juster & Robert P. Shay, 1964. "Consumer Sensitivity to Finance Rates: An Empirical and Analytical Investigation," NBER Books, National Bureau of Economic Research, Inc, number just64-2.
- Alena Bicakova, 2007.
"Does the Good Matter? Evidence on Moral Hazard and Adverse Selection from Consumer Credit Market,"
Economics Working Papers
ECO2007/02, European University Institute.
- Alena Bicakova, 2007. "Does the Good Matter? Evidence on Moral Hazard and Adverse Selection from Consumer Credit Market," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 66(1), pages 29-66, March.
- Elisabetta Iossa & Giuliana Palumbo, 2010.
"Over-optimism and lender liability in the consumer credit market,"
Oxford Economic Papers,
Oxford University Press, vol. 62(2), pages 374-394, April.
- Elisabetta Iossa & Giuliana Palumbo, 2006. "Overoptimism and Lender Liability in the Consumer Credit Market," Temi di discussione (Economic working papers) 598, Bank of Italy, Economic Research and International Relations Area.
- Serena Trucchi, 2011. "How credit markets affect homeownership: an explanation based on differences between Italian regions," CeRP Working Papers 122, Center for Research on Pensions and Welfare Policies, Turin (Italy).
- Charles Grant & Mario Padula, 2012. "Using Bounds to Investigate Household Debt Repayment Behaviour," CEDI Discussion Paper Series 12-06, Centre for Economic Development and Institutions(CEDI), Brunel University.
- Winfried Koeniger & Thomas Hintermaier, 2007. "Incomplete Markets and the Evolution of US Consumer Debt," 2007 Meeting Papers 256, Society for Economic Dynamics.
- Epstein, Gil S, 2002.
"Informational Cascades and Decision to Migrate,"
CEPR Discussion Papers
3287, C.E.P.R. Discussion Papers.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum).
If references are entirely missing, you can add them using this form.