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Heterogeneous car buyers: a stylized fact

Author

Listed:
  • Ana M. Aizcorbe
  • Benjamin Bridgman
  • Jeremy J. Nalewaik

Abstract

Using a new dataset, we document a systematic pattern in the demographic characteristics of car buyers over the model year: as vehicle prices fall over the model year, so do buyer incomes. This pattern is consistent with price-insensitive buyers purchasing early in the year, while others wait until prices decline, and suggests price skimming (i.e. intertemporal price discrimination). Such consumer heterogeneity over the model year raises questions for measuring quality improvements in new goods.

Suggested Citation

  • Ana M. Aizcorbe & Benjamin Bridgman & Jeremy J. Nalewaik, 2009. "Heterogeneous car buyers: a stylized fact," Finance and Economics Discussion Series 2009-12, Board of Governors of the Federal Reserve System (U.S.).
  • Handle: RePEc:fip:fedgfe:2009-12
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    References listed on IDEAS

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    1. Mark Bils, 2009. "Do Higher Prices for New Goods Reflect Quality Growth or Inflation?," The Quarterly Journal of Economics, Oxford University Press, vol. 124(2), pages 637-675.
    2. Adam Copeland & Wendy E. Dunn & George J. Hall, 2005. "Prices, production, and inventories over the automotive model year," Finance and Economics Discussion Series 2005-25, Board of Governors of the Federal Reserve System (U.S.).
    3. Harikesh Nair, 2007. "Intertemporal price discrimination with forward-looking consumers: Application to the US market for console video-games," Quantitative Marketing and Economics (QME), Springer, vol. 5(3), pages 239-292, September.
    4. Carol Corrado & Wendy E. Dunn & Maria Ward Otoo, 2006. "Incentives and prices for motor vehicles: what has been happening in recent years?," Finance and Economics Discussion Series 2006-09, Board of Governors of the Federal Reserve System (U.S.).
    5. Ana Aizcorbe, 2006. "Why Did Semiconductor Price Indexes Fall So Fast in the 1990s? A Decomposition," Economic Inquiry, Western Economic Association International, vol. 44(3), pages 485-496, July.
    6. Pashigian, B Peter & Bowen, Brian & Gould, Eric, 1995. "Fashion, Styling, and the Within-Season Decline in Automobile Prices," Journal of Law and Economics, University of Chicago Press, vol. 38(2), pages 281-309, October.
    7. Tim Erickson & Ariel Pakes, 2011. "An Experimental Component Index for the CPI: From Annual Computer Data to Monthly Data on Other Goods," American Economic Review, American Economic Association, vol. 101(5), pages 1707-1738, August.
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    Cited by:

    1. McCully, Brett & Pence, Karen M. & Vine, Daniel J., 2015. "How Much Are Car Purchases Driven by Home Equity Withdrawal? Evidence from Household Surveys," Finance and Economics Discussion Series 2015-106, Board of Governors of the Federal Reserve System (U.S.).
    2. Adam Copeland, 2014. "Intertemporal substitution and new car purchases," RAND Journal of Economics, RAND Corporation, vol. 45(3), pages 624-644, September.
    3. Adam Copeland, 2013. "Seasonality, consumer heterogeneity and price indexes: the case of prepackaged software," Journal of Productivity Analysis, Springer, vol. 39(1), pages 47-59, February.

    More about this item

    Keywords

    Automobiles - Prices ; Consumer behavior;

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