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

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