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When to Haggle, When to Hold Firm? Lessons from the Used Car Retail Market

Guofang Huang

出版	SSRN, 2017
URL	http://books.google.com.hk/books?id=8I37zgEACAAJ&hl=&source=gbs_api

註釋

Though haggling has been the conventional way for auto retailers to sell cars, the last two decades have witnessed the systematic adoption of no-haggle prices by many large dealerships, including the largest new car and used car dealership chains. This paper develops a structural empirical model to estimate sellers' profits under posted price and haggling, and investigates how market conditions affect sellers' optimal pricing formats. The model incorporates a simple class of bargaining mechanisms into a standard random-coefficient discrete choice model. With the extension, the product-level demand system is estimated using data with only list prices, and the unobserved price discounts are also recovered in the estimation. The counterfactual experiments yield a few interesting findings. First, dealers' adopted pricing formats seem superior to the alternative ones. Second, dealers enjoying larger market power through vertical differentiation and carrying a large number of models are more likely to have posted price as their optimal pricing format.