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Automobile Prices in Market Equilibrium with Unobserved Price Discrimination

Author

Listed:
  • Xavier d'Haultfoeuille

    (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - Groupe ENSAE-ENSAI - Groupe des Écoles Nationales d'Économie et Statistique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - Groupe ENSAE-ENSAI - Groupe des Écoles Nationales d'Économie et Statistique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique)

  • Isis Durrmeyer

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Philippe Février

    (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - Groupe ENSAE-ENSAI - Groupe des Écoles Nationales d'Économie et Statistique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - Groupe ENSAE-ENSAI - Groupe des Écoles Nationales d'Économie et Statistique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique)

Abstract

In markets where sellers are able to price discriminate, individuals pay different prices that may be unobserved by the econometrician. This paper considers the structural estimation of a demand and supply model à la Berry et al. (1995) with such price discrimination and limited information on prices taking the form of, e.g., observing list prices from catalogues or average prices. Within this framework, identification is achieved by using supply-side conditions, provided that the marginal costs of producing and selling the goods do not depend on the characteristics of the buyers. The model can be estimated by GMM using a nested fixed point algorithm that extends BLP's algorithm to our setting. We apply our methodology to estimate the demand and supply in the French new automobile market. Our results suggest that discounting arising from price discrimination is important. The average discount is estimated to be 9.6%, with large variation depending on buyers' characteristics and cars' specifications. Our results are consistent with other evidence on transaction prices in France.

Suggested Citation

  • Xavier d'Haultfoeuille & Isis Durrmeyer & Philippe Février, 2025. "Automobile Prices in Market Equilibrium with Unobserved Price Discrimination," Working Papers hal-04947219, HAL.
    • Handle: RePEc:hal:wpaper:hal-04947219
    DOI: 10.1093/restud/rdy064
    Note: View the original document on HAL open archive server: https://hal.science/hal-04947219v1
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    Cited by:

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    2. Isis Durrmeyer, 2022. "Winners and Losers: the Distributional Effects of the French Feebate on the Automobile Market," The Economic Journal, Royal Economic Society, vol. 132(644), pages 1414-1448.
    3. Bielig Andreas, 2024. "Passenger car market and regional price discriminations for new cars: Case study and empirical analysis for Poland 2004–2021," International Journal of Management and Economics, Warsaw School of Economics, Collegium of World Economy, vol. 60(4), pages 285-297.
    4. Hui Liu & Yao Luo, 2025. "Demand Analysis under Price Rigidity and Endogenous Assortment: An Application to China's Tobacco Industry," Papers 2501.17251, arXiv.org.
    5. Sesmero, Juan Pablo & Balagtas, Joseph V. & Wu, Steven Y. & Albert Scott, Francisco, 2023. "Out-of-Equilibrium Behavior and Inference on Firm Conduct Evidence from Laboratory Experiments," 2023 Annual Meeting, July 23-25, Washington D.C. 335854, Agricultural and Applied Economics Association.
    6. Strittmatter, Anthony & Lechner, Michael, 2020. "Sorting in the used-car market after the Volkswagen emission scandal," Journal of Environmental Economics and Management, Elsevier, vol. 101(C).
    7. Lu, Tingmingke, 2023. "Response of new car buyers to alternative energy policies: The role of vehicle use heterogeneity," Economic Modelling, Elsevier, vol. 120(C).
    8. Smith, Howard & Beckert, Walter & Takahashi, Yuya, 2020. "Competition in a spatially-differentiated product market with negotiated prices," CEPR Discussion Papers 15379, C.E.P.R. Discussion Papers.
    9. Benjamin R. Shiller, 2022. "Discreet Personalized Pricing," CESifo Working Paper Series 10025, CESifo.
    10. Augustus Smith, 2025. "The consequences of a British combustion engine ban," Economics Series Working Papers 1083, University of Oxford, Department of Economics.
    11. Xavier d'Haultfoeuille & Isis Durrmeyer & Jean-François Fournel & Alessandro Iaria, 2025. "Price discrimination and online sales in the automobile industry," Working Papers hal-05157451, HAL.
    12. Mian Dai & Qiang Gong & Shiyu Tan, 2021. "Home bias and market power: Evidence from the Chinese automobile industry," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(3), pages 986-1017, November.
    13. Marco Duarte & Lorenzo Magnolfi & Mikkel Sølvsten & Christopher Sullivan, 2024. "Testing firm conduct," Quantitative Economics, Econometric Society, vol. 15(3), pages 571-606, July.
      • Marco Duarte & Lorenzo Magnolfi & Mikkel S{o}lvsten & Christopher Sullivan, 2023. "Testing Firm Conduct," Papers 2301.06720, arXiv.org, revised Jan 2024.
    14. D’Haultfœuille, Xavier & Durrmeyer, Isis & Février, Philippe, 2016. "Disentangling sources of vehicle emissions reduction in France: 2003–2008," International Journal of Industrial Organization, Elsevier, vol. 47(C), pages 186-229.
    15. Guofang Huang, 2020. "When to haggle, when to hold firm? Lessons from the used‐car retail market," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 29(3), pages 579-604, July.
    16. Ertian Chen, 2025. "Robust Structural Estimation under Misspecified Latent-State Dynamics," Papers 2510.22347, arXiv.org, revised Nov 2025.
    17. Laura Marcela Capera Romero, 2021. "The Effects of Usury Ceilings on Consumers Welfare: Evidence from the Microcredit Market in Colombia," Tinbergen Institute Discussion Papers 21-055/IV, Tinbergen Institute.

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    Keywords

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    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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