Dealer Pricing of Consumer Credit
40 Pages
Posted: 6 Nov 2005
Centre for Economic Policy Research (CEPR); Università di Torino - Dip. di Economia e Statistica
VU University Amsterdam; Tinbergen Institute - Tinbergen Institute Amsterdam (TIA)
University of St. Gallen; CESifo (Center for Economic Studies and Ifo Institute); Center for Financial Studies (CFS); IZA Institute of Labor Economics
There are 3 versions of this paper
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:
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
