Price Discrimination and Social Network : Evidence from North American Auto Dealership Transaction Data
AbstractUsing personnel and transaction data obtained from two auto dealerships located in a large city in Canada, we examine whether same or different ethnic matches between salespersons and customers affect the prices and quantities of transactions. First, compared with White-White matches, we find little evidence of price discrimination for different ethnicity matches (such as White vs. Middle East), and we detect neither premium price setting nor discounting among same ethnicity matches (such as Asian vs. Asian) relative to different ethnicity matches. Regarding quantity, however, sales ratios to ethnically-same customers are substantially higher than is the case for ethnically dissimilar customers. For example, East Asian salespersons concluded more than 30% of their sales with East Asian customers. Moreover, we find that high-performing salespersons skillfully utilize social networks to conclude transactions with customers of the same ethnicity, especially when business conditions are unfavorable. This finding suggests that social networks are important to understanding the nature of auto retail markets.
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Bibliographic InfoPaper provided by Institute of Economic Research, Hitotsubashi University in its series Discussion Paper Series with number a529.
Date of creation: Mar 2010
Date of revision:
Find related papers by JEL classification:
- M12 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Personnel Management; Executives; Executive Compensation
- M5 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics
- J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-07-03 (All new papers)
- NEP-IND-2010-07-03 (Industrial Organization)
- NEP-NET-2010-07-03 (Network Economics)
- NEP-SOC-2010-07-03 (Social Norms & Social Capital)
- NEP-URE-2010-07-03 (Urban & Real Estate Economics)
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