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Price Discrimination and Social Network : Evidence from North American Auto Dealership Transaction Data

  • Tsuru, Tsuyoshi
  • Owan, Hideo
  • Uehara, Katsuhito
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    Using 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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    File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/18310/1/DP529.pdf
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    Paper provided by Institute of Economic Research, Hitotsubashi University in its series Discussion Paper Series with number a529.

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    Date of creation: Mar 2010
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    Handle: RePEc:hit:hituec:a529
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    1. Harry J. Holzer & Keith R. Ihlanfeldt, 1998. "Customer Discrimination And Employment Outcomes For Minority Workers," The Quarterly Journal of Economics, MIT Press, vol. 113(3), pages 835-867, August.
    2. Laura Giuliano & David I. Levine & Jonathan Leonard, 2009. "Manager Race and the Race of New Hires," Journal of Labor Economics, University of Chicago Press, vol. 27(4), pages 589-631, October.
    3. Jonathan S. Leonard & David I. Levine & Laura Giuliano, 2010. "Customer Discrimination," The Review of Economics and Statistics, MIT Press, vol. 92(3), pages 670-678, August.
    4. 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 304-21, June.
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