Who Loses When Prices Are Negotiated? An Analysis of the New Car Market

36 Pages Posted: 6 May 2015 Last revised: 19 Nov 2016

See all articles by Ambarish Chandra

Ambarish Chandra

University of Toronto

Sumeet Gulati

University of British Columbia - Food and Resource Economics

James Sallee

University of Michigan at Ann Arbor

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Date Written: April 13, 2016

Abstract

In this paper 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. Controlling for all observable aspects of the transaction, older consumers perform progressively worse, and this 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. We also find 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.

Keywords: Gender; Age; Automobiles; Negotiations; Bargaining

Suggested Citation

Chandra, Ambarish and Gulati, Sumeet and Sallee, James, Who Loses When Prices Are Negotiated? An Analysis of the New Car Market (April 13, 2016). Rotman School of Management Working Paper No. 2602526, Available at SSRN: https://ssrn.com/abstract=2602526 or http://dx.doi.org/10.2139/ssrn.2602526

Ambarish Chandra (Contact Author)

University of Toronto ( email )

105 St George Street
Toronto, Ontario M5S3E6
Canada

Sumeet Gulati

University of British Columbia - Food and Resource Economics ( email )

2329 West Mall
Vancouver, British Columbia BC V6T 1Z4
Canada
+1 604-822-2144 (Phone)
+1 604-822-2184 (Fax)

HOME PAGE: http://www.landfood.ubc.ca/people/sumeet.gulati/

James Sallee

University of Michigan at Ann Arbor ( email )

500 S. State Street
Ann Arbor, MI 48109
United States

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