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Repairing the Damage: The Effect of Price Expectations on Auto-Repair Price Quotes

Author

Listed:
  • Meghan R. Busse
  • Ayelet Israeli
  • Florian Zettelmeyer

Abstract

In this paper we investigate whether sellers treat consumers differently on the basis of how well-informed consumers appear to be. We implement a large-scale field experiment in which callers request price quotes from automotive repair shops. We show that sellers alter their initial price quotes depending on whether consumers appear to be well-informed, uninformed, or poorly informed about market prices. We find that repair shops quote higher prices to callers who cite a higher expected price. We find that women are quoted higher prices than men when callers signal that they are uninformed about market prices. However, gender differences disappear when callers mention an expected price for the repair. Finally, we find that repair shops are more likely to offer a price concession if asked to do so by a woman than a man.

Suggested Citation

  • Meghan R. Busse & Ayelet Israeli & Florian Zettelmeyer, 2013. "Repairing the Damage: The Effect of Price Expectations on Auto-Repair Price Quotes," NBER Working Papers 19154, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:19154 Note: IO
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    References listed on IDEAS

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    1. Andreas Leibbrandt & John A. List, 2015. "Do Women Avoid Salary Negotiations? Evidence from a Large-Scale Natural Field Experiment," Management Science, INFORMS, vol. 61(9), pages 2016-2024, September.
    2. Simon P. Anderson & André de Palma, 2005. "Price Dispersion and Consumer Reservation Prices," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(1), pages 61-91, March.
    3. Castillo, Marco & Petrie, Ragan & Torero, Maximo & Vesterlund, Lise, 2013. "Gender differences in bargaining outcomes: A field experiment on discrimination," Journal of Public Economics, Elsevier, vol. 99(C), pages 35-48.
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    5. Henry S. Schneider, 2012. "Agency Problems and Reputation in Expert Services: Evidence from Auto Repair," Journal of Industrial Economics, Wiley Blackwell, vol. 60(3), pages 406-433, September.
    6. 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.
    7. Valley, Kathleen L. & White, Sally Blount & Neale, Margaret A. & Bazerman, Max H., 1992. "Agents as information brokers: The effects of information disclosure on negotiated outcomes," Organizational Behavior and Human Decision Processes, Elsevier, vol. 51(2), pages 220-236, March.
    8. Gurumurthy Kalyanaram & Russell S. Winer, 1995. "Empirical Generalizations from Reference Price Research," Marketing Science, INFORMS, vol. 14(3_supplem), pages 161-169.
    9. Alan T. Sorensen, 2000. "Equilibrium Price Dispersion in Retail Markets for Prescription Drugs," Journal of Political Economy, University of Chicago Press, vol. 108(4), pages 833-862, August.
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    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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