Do Geographic Entry Restrictions Increase Car Prices?
Many states allow existing retail vehicle dealerships to challenge the entry of new competitors. Earlier studies found these restrictions resulted in higher vehicle retail prices. However, the studies used average vehicle prices or proxies for average prices and were not able to control for the numerous features and amenities that differentiate vehicles. The previous work was also conducted prior to the development of Internet shopping. This study tests the impact of state entry restrictions using a new data set that addresses these issues. Regression analysis finds that states having entry restrictions on new dealerships do not have higher vehicle prices.
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