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Dealer Pricing of Consumer Credit

40 Pages Posted: 6 Nov 2005  

Giuseppe Bertola

Centre for Economic Policy Research (CEPR); Università di Torino - Dip. di Economia e Statistica

Stefan Hochguertel

VU University Amsterdam; Tinbergen Institute - Tinbergen Institute Amsterdam (TIA)

Winfried Koeniger

University of St. Gallen; CESifo (Center for Economic Studies and Ifo Institute); Center for Financial Studies (CFS); IZA Institute of Labor Economics

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Abstract

Price discrimination incentives may induce dealers to bear the financial cost of their customers' credit purchases. We focus on how financial market imperfections make it possible to segment the customer population. When borrowing and lending rates differ from each other and from the rate of interest on a durable good purchase, the structure of those rates influences customers' choices to purchase on credit or cash terms, and the scope for dealers' price discrimination. Empirical analysis of a set of installment-credit, personal-loan, and regional interest rate data offers considerable support to the assumptions and implications of our theoretical framework.

Suggested Citation

Bertola, Giuseppe and Hochguertel, Stefan and Koeniger, Winfried, Dealer Pricing of Consumer Credit. International Economic Review, Vol. 46, No. 4, pp. 1103-1142, November 2005. Available at SSRN: https://ssrn.com/abstract=825174

Giuseppe Bertola (Contact Author)

Università di Torino - Dip. di Economia e Statistica ( email )

Lungo Dora Siena 100
Torino, 10153
Italy
+39 011 670 4405 (Phone)

HOME PAGE: http://https://sites.google.com/site/gipbert

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Stefan Hochguertel

VU University Amsterdam ( email )

Dept Econ (FEWEB)
De Boelelaan 1105
1081HV Amsterdam
Netherlands
+31 20 59 86033 (Phone)
+31 20 59 89870 (Fax)

Tinbergen Institute - Tinbergen Institute Amsterdam (TIA)

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

Winfried Koeniger

University of St. Gallen ( email )

Swiss Institute for Empirical Economic Research
Varnbüelstr. 14
St.Gallen, CH-9000
Switzerland

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Center for Financial Studies (CFS) ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Schaumburg-Lippe Str. 7/9
D-53072 Bonn
Germany

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