State Automobile Franchise Laws: Public or Private Interests?

Phoenix Center Perspectives No. 16-06

15 Pages Posted: 12 Sep 2016

See all articles by Thomas Randolph Beard

Thomas Randolph Beard

Auburn University - Department of Economics

George S. Ford

Phoenix Center for Advanced Legal & Economic Public Policy Studies

Date Written: July 12, 2016

Abstract

First, we address the claim that state auto franchise laws are protectionist and thus serve primarily private rather than public interests by comparing the evidence presented to support this view to the theoretical predictions from economic theory and what we know about car markets. We conclude that the evidence presented does not provide much support for a protectionist slant on these laws. Second, we evaluate the competing claim that the independent dealer serves an important role for consumers. Using a Nash bargaining model that is motivated by accepted facts about auto sales, we find that there are consumer benefits of state laws requiring independent sales of automobiles — primarily, lower prices for consumers. Indeed, we find that a consumer motivation for these laws has good support and appears to be most consistent with the available evidence.

Keywords: Automobile Franchise Laws, Franchising, Automobiles, Cars, Auto Dealerships

JEL Classification: L4, L5, L65, L81

Suggested Citation

Beard, Thomas Randolph and Ford, George S., State Automobile Franchise Laws: Public or Private Interests? (July 12, 2016). Phoenix Center Perspectives No. 16-06 . Available at SSRN: https://ssrn.com/abstract=2837289

Thomas Randolph Beard

Auburn University - Department of Economics ( email )

415 W. Magnolia
Auburn, AL 36849-5242
United States

George S. Ford (Contact Author)

Phoenix Center for Advanced Legal & Economic Public Policy Studies ( email )

5335 Wisconsin Avenue, NW
Suite 440
Washington, DC 20015
United States

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