The Informational Role of Product Trade-Ins for Pricing Durable Goods

Journal of Industrial Economics, Forthcoming

Posted: 25 Feb 2015

See all articles by Ohjin Kwon

Ohjin Kwon

Concordia University, Quebec - John Molson School of Business

Anthony J. Dukes

University of Southern California - Marshall School of Business

Sivaramakrishnan Siddarth

University of Southern California - Marketing Department

Jorge M. Silva-Risso

University of California, Riverside (UCR) - A. Gary Anderson Graduate School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: October 1, 2014

Abstract

This research theorizes that sellers of durable goods can utilize inferences about the buyer’s willingness to pay based not only on her decision to trade in the old good but also on its characteristics. We find empirical support for this theory using transaction data for new car purchases. The results support the notion that dealers infer a higher willingness to pay and charge higher prices to consumers who trade in a used vehicle than to those who do not. We also find that dealers charge even higher prices to those consumers who trade in used cars that are similar to the new one.

Keywords: Pricing, Price Discrimination, Durable Goods, Trade-Ins

JEL Classification: D40, L10

Suggested Citation

Kwon, Ohjin and Dukes, Anthony J. and Siddarth, Sivaramakrishnan and Silva-Risso, Jorge M., The Informational Role of Product Trade-Ins for Pricing Durable Goods (October 1, 2014). Journal of Industrial Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2569138

Ohjin Kwon (Contact Author)

Concordia University, Quebec - John Molson School of Business ( email )

1455 De Maisonneuve Blvd
West, Montreal, Quebec, H3G 1M8
Canada

Anthony J. Dukes

University of Southern California - Marshall School of Business ( email )

701 Exposition Blvd
Los Angeles, CA 90089
United States
213-740-3846 (Phone)

HOME PAGE: http://sites.usc.edu/anthonydukes/

Sivaramakrishnan Siddarth

University of Southern California - Marketing Department ( email )

Hoffman Hall 701
Los Angeles, CA 90089-1427
United States

Jorge M. Silva-Risso

University of California, Riverside (UCR) - A. Gary Anderson Graduate School of Management ( email )

Riverside, CA 92521
United States

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