Who Loses when Prices are Negotiated? An Analysis of the New Car Market |
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| Authors: | Ambarish Chandra Sumeet Gulati James M Sallee |
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| Institution: | 1. Department of Management, UTSC and Rotman School of Management, University of Toronto, Toronto, Ontario Canada;2. Food and Resource Economics, University of British Columbia, Vancouver, British Columbia, Canada;3. Department of Agricultural and Resource Economics, University of California, Berkeley, Berkeley, California, U.S.A. |
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| Abstract: | We establish that there are large and persistent differences in final transaction prices for identical new cars, and that demographic characteristics explain at least 20% of the observed variation. Older consumers perform progressively worse in negotiations, and the age premium is greater for women than for men. Our results suggest that the complex nature of vehicle transactions leads to price dispersion in this market, and that the worst performing groups—older women—have the lowest rates of market participation. We conjecture that the results are driven by the sharp increases in women's education and labor force participation in recent decades. |
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