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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. 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.
    2. 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.
    3. George J. Stigler & James K. Kindahl, 1970. "The Behavior of Industrial Prices," NBER Books, National Bureau of Economic Research, Inc, number stig70-1, May.
    4. Lazear, Edward P, 1986. "Retail Pricing and Clearance Sales," American Economic Review, American Economic Association, vol. 76(1), pages 14-32, March.
    5. B. Peter Pashigian & Brian Bowen, 1992. "Why Has the Pricing of New Cars Changed?," University of Chicago - George G. Stigler Center for Study of Economy and State 82, Chicago - Center for Study of Economy and State.
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