Dealer Pricing of Consumer Credit

40 Pages Posted: 6 Nov 2005

See all articles by Giuseppe Bertola

Giuseppe Bertola

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

Stefan Hochguertel

VU University Amsterdam; Tinbergen Institute

Winfried Koeniger

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

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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:

Giuseppe Bertola (Contact Author)

Centre for Economic Policy Research (CEPR)

United Kingdom

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

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Stefan Hochguertel

VU University Amsterdam ( email )

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Winfried Koeniger

University of St. Gallen ( email )

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

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Center for Financial Studies (CFS) ( email )

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IZA Institute of Labor Economics ( email )

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Swiss Finance Institute ( email )

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