competition in posted prices with stochastic discounts we study price competition between firms over public list or posted prices when a fraction of consumers can subsequently receive discounts with some probability such stochastic discounts are a feature of markets in which some consumers bargain explicitly and of markets in which sellers use the marketing practice of couponing even though bargainers receive reductions off the posted prices the potential to discount dampens competitive pressure in the market thus raising all prices and increasing profits welfare falls because of the stochastic nature of the discounts which generates some misallocation of products to consumers stochastic discounts facilitate collusion by reducing the market share that can be gained from a deviation

risk private information and the family in the last fifteen years our understanding of the behavior of households in both highand low income countries has increased significantly econometric studies contributing to this body of knowledge concerned with the determinants of such behavior as labor supply fertility health and food consumption however have generally taken the structure of the household as exogenously given while some progress has been made concerning how changes in the legal structure alter patterns of family formation and breakup the wide variety of family organizations observed across countries of the world or the evolution of family structure within countries cannot be readily explained by existing models while some economists have suggested that organizations based on kinship can be understood in terms of transaction economies yoram ben porath 1980 robert pollak 1985 there are now few precise implications of this approach and little or no evidence of its usefulness for predicting or explaining the existence of any particular family structure in specific settings characterized by their natural endowments and or legal structure in this paper i discuss some recent studies of family and household organization in one specific context rural india that have sought to formulate a model of household structure based on the need for individuals in lowincome private information settings to protect themselves against intertemporal fluctuations in resources arising from the natural vagaries of water supply i also present some new evidence on the relationship between family arrangements and measured risk characteristics of the agricultural environment in these settings while many economists have highlighted risk and information consideration in the study of such formal rural institutions as sharecropping permanent servitude and contractual interlinking studies of these individual contractural arrangements have ignored the family itself as a risk mitigating institution moreover much of this literature has been solely concerned with ex ante measures to reduce risk contractual instruments or production factors that reduce the effects of variability in the exogenous production input rainfall on income mechanisms serving to preserve consumption stability ex post in the face of variability in realized income have been neglected

multiple equilibrium overnight rates in a dynamic interbank market game abstract we analyse a two period model of the interbank market i e the market where banks trade liquidity we assume that banks do not take the interbank interest rate as given but instead negotiate on interest rates and transaction volumes with each other the solution concept applied is the shapley value we show that there are a multiplicity of average equilibrium interest rates of the first period so that the average interest rate in this period does not convey any information on the expected liquidity situation on the interbank market as the banks control not only the transaction volumes but also the interest rates they can leave the interest rates constant and adjust the transaction volumes when for example a liquidity deficit becomes more likely

retail pricing and clearance sales sellers of new products are faced with having to guess demand conditions to set price appropriately but sellers are able to adjustprice over time and to learn from past mistakes additionally it is not necessary that all goods be sold with certainty it is sometimes better to set a high price and to risk no sale this process is modeledto explain retail pricing behavior and the time distribution of transactions prices start high and fall as a function of time on theshelf the initial price and rate of decline can be predicted and depends on thinness of the market the proportion of customers who are window shoppers and other observable characteristics copyright 1986 by american economic association

endogeneity in brand choice models applications of random utility models to scanner data have been widely presented in marketing for the last 20 years one particular problem with these applications is that they have ignored possible correlations between the independent variables in the deterministic component of utility price promotion etc and the stochastic component or error term in fact marketing mix variables such as price not only affect brand purchasing probabilities but are themselves endogenously set by marketing managers this work tests whether these endogeneity problems are important enough to warrant consideration when estimating random utility models with scanner panel data our results show that not accounting for endogeneity may result in a substantial bias in the parameter estimates

does competition reduce price dispersion new evidence from the airline industry we analyze the effects of competition on price dispersion in the airline industry using panel data from 1993 q1 through 2006 q3 competition has a negative effect on price dispersion in line with the textbook treatment of price discrimination this effect is pronounced for routes with consumers characterized by relatively heterogeneous elasticities of demand on routes with a homogeneous customer base the effects of competition on price dispersion are smaller our results contrast with those of borenstein and rose who found that price dispersion increases with competition we reconcile the different results by showing that the cross sectional estimator suffers from omitted variable bias

race and gender discrimination in bargaining for a new car more than three hundred paired audits at new car dealerships reveal that dealers quoted significantly lower prices to white males than to black or female test buyers using identical scripted bargaining strategies ancillary evidence suggests that the dealerships disparate treatment of women and blacks may be caused by dealers statistical inferences about consumers reservation prices but the data do not strongly support any single theory of discrimination copyright 1995 by american economic association

consumer search and dynamic price dispersion an application to gasoline markets this article studies the role of imperfect information in explaining price dispersion we use a new panel data set on the u s retail gasoline industry and propose a new test of temporal price dispersion to establish the importance of consumer search we show that price rankings vary significantly over time however they are more stable among stations at the same street intersection weestablishtheequilibriumrelationshipsbetweenpricedispersionandkeyvariables from consumer search models price dispersion increases with the number of firms in the market decreases with the production cost and increases with search costs

nash s theory of cooperative games as a predictor of the outcomes of buyer seller negotiations an experiment in media purchasing the authors report an experimental investigation of the ability of nash s theory of cooperative games to predict the outcomes of buyer seller negotiations using the purchase of media time as an ex

modeling interdependent consumer preferences abstract a consumer s preference for an offering can be influenced by the preferences of others in many ways ranging from social identification and inclusion to the benefits of network externalities in this article the authors introduce a bayesian spatial autoregressive discrete choice model to study the preference interdependence among individual consumers the autoregressive specification can reflect patterns of heterogeneity in which influence propagates within and across networks these patterns cannot be modeled with standard random effect specifications and can be difficult to capture with covariates in a linear model the authors illustrate their model of interdependent preferences with data on automobile purchases and show that preferences for japanese made cars are related to geographically and demographically defined networks

competitive pricing behavior in the auto market a structural analysis in a competitive marketplace the effectiveness of any element of the marketing mix is determined not only by its absolute value but also by its relative value with respect to the competition for example the effectiveness of a price cut in increasing demand is critically related to competitors reaction to the price change managers therefore need to know the nature of competitive interactions among firms in this paper we take a theory driven empirical approach to gain a deeper understanding of the competitive pricing behavior in the u s auto market the ability motivation paradigm posits that a firm needs both the ability and the motivation to succeed in implementing a strategy boulding and staelin 1995 we use arguments from the game theoretic literature to understand firm motivation and abilities in different segments of the auto market we then combine these insights from the game theoretic literature and the ability motivation paradigm to develop hypotheses about competition in different segments of the u s auto market to test our hypotheses of competitive behavior we estimate a structural model that disentangles the competition effect from the demand and cost effects on prices the theory of repeated games predicts that firms with a long run profitability objective will try to sustain cooperative pricing behavior as a stable equilibrium when conditions permit for example markets with high concentration and stable market environments are favorable for sustaining cooperative behavior and therefore provide firms with the ability to cooperate the theory of switching costs suggests that in markets in which a firm s current customers tend to be loyal firms have a motivation to compete very aggressively for new customers recognizing the positive benefits of loyalty from the customer base in the long run as consumer loyalty in the market increases the gains from increasing market share by means of aggressive competitive behavior are more than offset by losses in profit margins firms therefore have the motivation to price cooperatively empirically we find aggressive behavior in the minicom pact and subcompact segments cooperative behavior in the compact and midsize segments and bertrand behavior in the full size segment these findings are consistent with our theory based hypotheses about competition in different segments in estimating a structural model of the auto market we address several methodological issues a particular difficulty is the large number of car models in the u s auto market existing studies have inferred competitive behavior only in markets with two to four products they also use relatively simple functional forms of demand to facilitate easy estimation functional forms of demand however impose structure on cross elasticities between products such structure when inappropriate can bias the estimates of competitive interaction we therefore use the random coefficients logit demand model to allow flexibility in cross elasticities we also use recent advances in new empirical industrial organization neio to extend structural estimation of competitive behavior to markets with a large number of products we use the simulation based estimation approach developed by berry et al 1995 to estimate our model a frequent criticism of the neio approach is that its focus on industry specific studies limits the generalizability of its findings in this study we retain the advantages of neio methods but partially address the issue of generalizability by analyzing competitive behavior in multiple segments within the auto industry to see whether there is a consistent pattern that can be explained by theory theoretical modelers can use our results to judge the appropriateness of their models in predicting competitive outcomes for the markets that they analyze a by product of our analysis is that we also get estimates of demand and cost apart from competitive interactions for the market managers can use these estimates to perform what if analysis they can answer questions about what prices to charge when a new product is introduced or when an existing product s characteristics are changed

who loses when prices are negotiated an analysis of the new car market we establish that there are large and persistent differences in final transaction prices for identical new cars and that demographic characteristics explain at least 20 of the observed variation older consumers perform progressively worse in negotiations and the age premium is greater for women than for men our results suggest that the complex nature of vehicle transactions leads to price dispersion in this market and that the worst performing groups older women have the lowest rates of market participation we conjecture that the results are driven by the sharp increases in women s education and labor force participation in recent decades

let me talk to my manager haggling in a competitive environment although negotiating over prices with sellers is common in many markets such as automobiles furniture services consumer electronics etc it is not clear how a haggling price policy can help a firm gain a strategic advantage or whether it is even sustainable in a competitive market in this paper we explore the implications of haggling and fixed prices as pricing policies in a competitive market we develop a model in which two competing retailers choose between offering either a fixed price or haggling over prices with customers there are two consumer segments in our analysis one segment thehagglers has a lower opportunity cost of time and a lower haggling cost than the other segment thenonhagglers when both retailers follow the same pricing policy then a haggling policy is more profitable than a fixed price policy only when the proportion of nonhagglers is sufficiently high we find two kinds of prisoners dilemma under some conditions a more profitable haggling policy can be broken by a fixed price policy and under other conditions a fixed price policy can be broken by a haggling policy surprisingly we show that under some conditions an asymmetric outcome with one retailer haggling and the other offering a fixed price is also an equilibrium

a simultaneous model of consumer brand choice and negotiated price in this paper we develop a simultaneous model of consumer brand choice and negotiated price in the highly relevant marketing context of automobile transactions consumer brand choice is modeled as a multinomial probabilistic outcome and the individual consumer level transaction price is modeled to be consistent with the nash bargaining solution our simultaneous model introduces a natural way to account for price endogeneity in a microlevel choice setting when the price paid is individual specific and correlated with the idiosyncratic preference of a buyer it also accounts for the potential selectivity bias in studying the negotiated price by integrating consumer brand choice modeling we apply the proposed model to a data set of 4 795 consumer automobile purchases the empirical results show that the proposed approach not only better fits the data of consumer choice and negotiated price but it also provides additional insights into buyers and sellers behaviors in comparison with models that study only consumer choice or the negotiated price but not both simultaneously

bargaining with incomplete information an infinite horizon model with two sided uncertainty the resolution of any bargaining conflict depends crucially on the relative urgency of the agents to reach agreement and the information each agent has about the others preferences this paper explores within the context of an infinite horizon bargaining model with two sided uncertainty how timing and information affect the rational behaviour of agents when commitment is not possible since the bargainers are uncertain about whether trade is desirable they must communicate some of their private information before an agreement can be reached this need for learning due to incomplete information about preferences results in bargaining inefficiencies trade often occurs after costly delay thus the model provides an explanation for the inefficient bargaining behaviour that appears to occur often in practice

dynamic bargaining with transaction costs a buyer and seller alternate making offers until an offer is accepted or someone terminates negotiations the seller s valuation is common knowledge but the buyer s valuation is known only by the buyer impatience to reach an agreement comes from two sources the traders discount future payoffs and there are transaction costs of bargaining equilibrium behavior involves either immediate trade delayed trade or immediate termination depending on the size of the gains from trade and the relative bargaining costs this contrasts with the pure discounting model where termination never occurs and the pure transaction cost model where delayed trade never occurs

a bargaining theory of distribution channels abstract a critical factor in channel relationships between manufacturers and retailers is the relative bargaining power of both parties in this article the authors develop a framework to examine bargaining between channel members and demonstrate that the bargaining process actually affects the degree of coordination and that two part tariffs will not be part of the market contract even in a simple one manufacturer one retailer channel to establish the institutional and theoretical bases for these results the authors relax the conventional assumption that the product being exchanged is completely specifiable in a contract they show that the institution of bargaining has force and it affects channel coordination when the complexity of nonspecifiability of the product exchange is present the authors find that greater retailer power promotes channel coordination thus there are conditions in which the presence of a powerful retailer might actually be beneficial to all channel members the authors rec

is the effect of competition on price dispersion nonmonotonic evidence from the u s airline industry we investigate the effect of competition on price dispersion in the airline industry using panel data from 1993 to 2008 we find a nonmonotonic effect of competition on price dispersion an increase in competition is associated with greater price dispersion in concentrated markets but with less price dispersion in competitive markets an inverse u relationship our empirical findings are consistent with an oligopolistic second degree price discrimination model and encompass contradictory findings in the literature

dealer price discrimination in new car purchases evidence from the consumer expenditure survey this paper documents the variation in dealer discounts for new cars using transactions price data from the consumer expenditure survey consumer specific characteristics fail to explain dealer discounts whereas model market specific and purchase transaction variables e g first time purchase trade in and financing through dealer do explain them the results contradict earlier findings of race and gender discrimination based on a controlled experiment this contradiction is reconciled by examining the higher moments of the empirical discount distribution while mean and median markups do not vary by race and gender minority purchases are characterized by higher dispersion this may rationalize the disparate treatment of minorities by dealers documented in the controlled experiment

multilateral bargaining and downstream competition we examine multilateral bargaining in vertical supply relationships that involve an upstream manufacturer who sells through two competing retailers in these relationships the negotiations are interdependent and bargaining externality may arise across the retailers in addition the timing by which the manufacturer negotiates with the retailers becomes important in simultaneous bargaining the retailers negotiate without knowing if an agreement has been reached in the other retail channel whereas in sequential bargaining the retailer in the second negotiation is able to observe whether an agreement was reached in the first negotiation we show that simultaneous bargaining is optimal for the manufacturer when the retail prices and profitability are similar and sequential bargaining is preferred when the dispersion in the retail prices is sufficiently large as a result of ex post renegotiations the manufacturer may strategically stock out the less profitable retailer who charged a relatively low retail price and exclusively supply only the retailer who charged a relatively high retail price and maintained high channel profitability moreover ex post multilateral bargaining can buffer downstream competition and thus lead to positive retail profits even in markets that are close to perfect competition

business cycle asymmetries characterisation and testing based on markov switching autoregressions tests for business cycle asymmetries are developed for markov switching autoregressive models the tests of deepness steepness and sharpness are wald statistics which have standard asymptotics for the standard two regime model of expansions and contractions deepness is shown to imply sharpness and vice versa whereas the process is always nonsteep two and three state models of u s gnp growth are used to illustrate the approach along with models of u s investment and consumption growth the robustness of the tests to model misspecification and the effects of regime dependent heteroscedasticity are investigated

price discrimination in political advertising evidence from the 2012 presidential election in 2010 the us supreme court loosened contribution limits to political action committees pacs sparking fears that big donors could exert outsize influence on elections by funding pac advertising however pacs are potentially handicapped when buying advertising time data from 2012 reveal that pacs pay 32 above regulated campaign rates i estimate a model of demand for advertising by pacs exploiting the misalignment of state and media market borders to address price endogeneity i find that prices reflect willingness to pay for viewer demographics rather than media bias the estimates further suggest that network owned stations discriminate more successfully than do local affiliates

labor supervision and institutional conditions evidence from bicol rice farms this article analyzes labor supervision activities reported in a survey of rice farmers in the bicol region of the philippines we present a theoretical model that relates supervision intensity to institutional conditions we estimate a supervision intensity equation and control for the decision to hire labor the decision to supervise hired labor and the type of the labor contract the empirical estimates use different village level spatial and demographic indicators as proxies for institutional conditions the results are consistent with the prediction of the theoretical model that supervision increases with weaker institutional conditions

technology market and community in contract choice rice harvesting in the philippines an attempt to incorporate institutional change as an endogenous factor in the economic system is a frontier of economics a perspective from new institutional economics is to view the evolution of institutions as having emerged from the efforts of individuals and groups who aimed to achieve more efficient resource allocation and to establish claims for larger income shares these efforts are mobilized in response to changes in economic variables such as resource endowments and technology under the constraints of existing social and cultural norms a massive body of literature has been accumulating in this field of research including game theories collective action principal agent contracting and transaction costs however the theoretical developments have not been paralleled by empirical analysis constrained by the difficulty of testing on purposively collected microeconomic data empirical studies have largely been based on broad historical observations with the results being rather conjectural in this article we attempt to fill this gap by a case study on changes in labor contracts that have been used for rice harvesting in the philippines for the three decades since the advent of the green revolution in the late 1960s the major hypotheses we test are as follows a dramatic changes in the labor contract arrangements were induced in order to reduce disequilibrium between labor s marginal costs and returns created by changes in rice production technology and market wage rates b villagers chose specific labor contract arrangements that were consistent with the norms of the particular rural village communities and c contract forms changed according to changes in community norms some results that pertain to the first decade of the green revolution had

one discriminatory rent or double jeopardy multicomponent negotiation for new car purchases about half of new car transactions actually consist of two transactions one in which the customer buys a new car from a dealer and the other in which the customer sells his or her existing car to the dealer as a trade in at most dealerships both the price of the new car and the price of the trade in are negotiated in such negotiations as a general rule car dealers are willing to trade off profits made on the new car versus profits made on the trade in to an economist this suggests that the dealer may see the new car customer as the source of a certain amount of extractable profit one discriminatory rent that can be subdivided into two arbitrary buckets the new car margin and the trade in margin economic models of bargaining tend to use a similar paradigm modeling the amount of total economic surplus created by the transaction and supposing that each party will get a share of that surplus that is determined by the party s bargaining power it is usually recognized that there are multiple price mechanisms that could convey the same division of surplus to the two parties if this is indeed a good description of how new car negotiations unfold then an observer comparing a similar set of transactions should expect new car and trade in profit margins to be negatively correlated the better the deal the customer gets on a new car the less good the deal one should expect the customer to get on the trade in an alternative view of this multicomponent negotiation is that customers or dealers or competition and market structure

the ability of nash s theory of cooperative games to predict the outcomes of buyer seller negotiations a dyad level test this research develops and implements a dyad level procedure for testing whether the outcomes of buyer seller negotiations correspond to settlements prescribed by nash s theory of cooperative games the procedure entails a multivariate statistical test in which some parameters are estimated by simulation while others are provided directly from the assessment of negotiator utility functions by means of conjoint analysis the procedure is applied to an experiment in which subjects participated in a realistic role playing exercise that replicated the purchase of television advertising time results indicate that at the 0 01 significance level 57 8 of the dyads can be rejected as not having achieved nash solutions these results and their implications for marketing practitioners as well as future research are discussed

estimating bargaining power in the market for existing homes although bargaining is common in markets for heterogeneous goods it has largely been ignored in the hedonic literature in a break from that tradition we establish sufficient conditions that permit one to identify the effect of buyer and seller bargaining on hedonic models our model is estimated using a previously overlooked feature of the american housing survey that permits us to observe characteristics of both buyers and sellers results suggest that household wealth gender and other demographic traits influence bargaining power in addition variation in bargaining power arising from the presence of school age children accounts for anomalous seasonal patterns reported in various widely cited indices of quality adjusted house prices

bargaining power in apartment sales in corsica a latent class approach this paper extends the bargaining model of harding et al harding j rosenthal s and sirmans cf 2003 estimating bargaining power in the market for existing homes review of economics and statist

tax incidence with endogenous quality and costly bargaining theory and evidence from hybrid vehicle subsidies abstract endogenous quality and bargaining are important features of many markets but are typically omitted from studies of incidence we develop a model with product upgrades and costly bargaining and find that tax rate pass through only partially characterizes the welfare impact of taxation consumers may respond to a tax or subsidy by changing product quality or by changing their bargaining effort we apply the insights of our theory to the study of subsidies for green goods specifically hybrid electric vehicles in canada we utilize highly detailed transaction data and leverage panel variation in subsidies across provinces for identification our baseline estimate finds that prices rises by 570 for every 1000 increase in the subsidy but this pass through estimate substantially underestimates consumer gains because a majority of this price increase 459 80 is due to increased product quality in the form of additional options and features

testing business cycle asymmetries based on autoregressions with a markov switching intercept implications of two concepts of asymmetry deepness and steepness are investigated for autoregressive processes with a markov switching intercept the formulas for the skewness of these processes and the skewness of the first differences of these processes are derived the parameter restrictions leading to nondeepness and nonsteepness are presented for the special case of a first order autoregression and two states it is shown that these restrictions imply that previous tests for asymmetries in autoregressive processes with a markov switching intercept can lead to wrong conclusions in an empirical application of the developed tests the u s unemployment rate is found to be steep

the informational role of product trade ins for pricing durable goods this research theorizes that sellers of durable goods can utilize inferences about the buyer s willingness to pay based not only on her decision to trade in the old good but also on its characteristics we find empirical support for this theory using transaction data for new car purchases the results support the notion that dealers infer a higher willingness to pay and charge higher prices to consumers who trade in a used vehicle than to those who do not we also find that dealers charge even higher prices to those consumers who trade in used cars that are similar to the new one

endogeneity and individual consumer choice abstract in many markets there is likely to be correlation both across periods in terms of the choices of one consumer and across consumers in terms of their choices in each period the former is caused by consumer heterogeneity and the latter may be the result of demand common shocks across consumers furthermore if firms partially observe these common shocks their market decisions may end up being endogenous and correlated with the common shocks because researchers cannot typically fully observe consumer heterogeneity and the common shocks the estimation method must account for the endogeneity of firms decisions in this article the authors present a test for endogeneity under unobserved consumer heterogeneity and common shocks which is based on a quasi likelihood estimation method to estimate the model parameters consistently when endogenous firm behavior unobserved heterogeneity and common shocks are present the test examines the differences in general method of moments coefficient estima

an empirical investigation of returns to search using data on search and choice behavior from a local automobile market we estimate monetary returns to search in terms of lower prices resulting from additional time invested in price search for our analytical framework we adapt a model developed in the job search literature to the problem of consumer search this framework is especially useful for illuminating the relationship between time spent searching the outcome of search and demand and supply side variables our results indicate that for this particular sample of buyers marginal returns to search are broadly consistent with what one might expect if consumers balance costs and benefits of search and that potential gains from additional search for lower car prices do not appear to be large for most consumers our study highlights many of the methodological difficulties involved in estimating returns to search including isolating returns to different outcomes of search and sensitivity of results to model specification and sampling error we deal with these problems by trying to isolate time spent searching for price from other uses of search time by deriving our model used in estimation from a specific conceptual framework and by extensive specification testing

to bargain or not to bargain the role of fixed costs in price negotiations abstract retailers routinely allow consumers to negotiate a discount off the posted price especially for big ticket items such as home appliances furniture automobiles and real estate as well as on online platforms such as amazon ebay and alibaba the profitability of such a strategy relative to selling only at posted prices depends on consumers willingness to initiate a negotiation and ability to negotiate a discount in this paper we incorporate a consumers decision of whether or not to negotiate into a demand model the decision to negotiate hinges on how the expected discount from negotiation compares to the magnitude of a non pecuniary cost that the consumer incurs by initiating the negotiation this cost has implications for consumer demand and firm profitability the current study shows how this cost can be non parametrically identified separately from consumers ability to get a discount and marginal utility of income the application of this model to individual level data on refrigera

sequential bargaining with incomplete information this paper describes a simple two person two period bargaining game and solves it using the concept of perfect bayesian equilibrium in which the actions of each player convey information which is used by his opponent the paper examines the effects of changes in bargaining costs the size of the contract zone and the length of the bargaining process on such aspects of the solution as the probability of impasse and the likelihood of concessions the combination of information transfer and the lack of pre commitment embodied in perfectness yields many surprising results common perceptions about the effects of parameter changes on bargaining processes are suspect and should be checked in the particular game being discussed

business cycle asymmetry a deeper look this paper distinguishes two types of asymmetry in business cycles deepness and steepness deepness is defined as the characteristic that troughs are further below trend than peaks are above most previous research has focused exclusively on steepness which refers to cycles in which contractions are steeper than expansions a test for deepness is proposed and applied to u s post war quarterly unemployment real gnp and industrial production evidence of deepness is found for unemployment and industrial production while the evidence for real gnp is weaker previous evidence of steepness in unemployment is confirmed

product differentiation and oligopoly in international markets the case of the u s automobile industry this paper develops and estimates a model of the u s automobile industry on the demand side a discrete choice model is adopted that is estimated using micro data from the consumer expenditure survey the estimation results are used in conjunction with population weights to derive aggregate demand on the supply side the automobile industry is modelled as an oligopoly with product differentiation equilibrium is characterized by the first order conditions of the profit maximizing firms the estimation results are used in counterfactual simulations to investigate two trade policy issues the effects of the ver and exchange rate pass through

automobile prices in market equilibrium with unobserved price discrimination in markets where sellers are able to price discriminate or the buyers to bargain individuals receive discounts over the posted prices that are usually not observed by the econometrician this paper considers the structural estimation of a demand and supply model a la berry et al 1995 when only posted prices are observed we consider that heterogeneous discounts occur due to price discrimination by firms on observable characteristics of consumers within this framework identification is achieved by assuming that the marginal costs of producing and selling the goods do not depend on the characteristics of the buyers we also require a condition relating the posted prices to the prices actually paid for instance we can assume that at least one group of individuals pays the posted prices under these two conditions the demand and supply parameters as well as the exact discounts corresponding to each type of consumers can be identified we apply our methodology to estimate the demand and supply in the new automobile market in france results suggest that discounting arising from price discrimination is important the average discount is estimated to be 10 5 with large variation depending on the buyers characteristics and cars specifications our results are in line with discounts generally observed in european and american automobile markets

bargaining search costs and equilibrium price distributions this paper studies a bargaining model of equilibrium price distributions consumers choose a seller at random and face search costs to switching to another store in the market equilibrium the prices at all stores are determined simultaneously as the perfect equilibrium of a bargaining game in this game the buyer has the outside option to search for another seller differences between the sellers types create price dispersions typically the number of active sellers increases with higher search costs the market equilibrium converges to the competitive equilibrium under perfect information when search costs become small

bargaining versus posted price selling abstract two popular selling methods bargaining and posted price selling are compared here in a dynamic model when bargaining costs no more than posted price selling we find that bargaining is always optimal when bargaining costs more however bargaining is still preferred if and only if the common cost for both selling methods is large enough we also find that an increase in the discount rate or the seller s bargaining power favors bargaining finally we find that if the distribution becomes more dispersed and the increase in a buyer s valuation is sufficiently large bargaining is more likely to be adopted

strategic delay in bargaining this paper analyses a bargaining model with incomplete information in which the time between offers is an endogenous strategic variable we find equilibria involving a delay to agreement that is due to the use of strategic time delay by bargainers to signal their relative strength under some specifications of the parameters delay is present in the unique sequential equilibrium whose beliefs satisfy one intuitive restriction this delay does not vanish as the minimal time between offers becomes small

do women pay more for new vehicles evidence from transaction price data recently there has been a debate concerning whether price discrimination by new vehicle dealers results in systematically higher prices for minority and female buyers ian ayres and peter siegelman 1995 and pinelopi koujianoi goldberg 1996 use different methodologies and different data sets and come to different conclusions ayres and siegelman use testergenerated paired audits and find that black and female test buyers were quoted higher prices than white males goldberg uses consumer expenditure survey ces data and finds no systematic evidence of price discrimination in transaction price discounts by race or sex but greater variation in discounts for blacks our paper contributes to the debate on price discrimination in new car purchases using a new j d power and associates database that reports gross profit directly from dealer financial software systems although our data set does not distinguish the race of the buyer we do get direct evidence on dealer profit for male and female buyers in a sample reflecting over 4 000 new vehicle transactions our paper addresses the previously obtained contradictory results and differs from the previous studies in several ways the database we use permits us to measure directly dealers self reported gross profit per vehicle the best measure of differential treatment the database reflects contemporaneously collected dealer data it comes from the same financial software programs that are used to automatically report data to the franchiser manufacturer financial institutions and motor vehicle bureaus as well as being used to calculate sales tax liabilities further the data set allows us to test for price discrimination in the profit contributions of ancillary tie ins such as service contracts credit life insurance and dealer residuals from financing the vehicle purchase in the ayres and siegelman study black auditors received initial offers or negotiated prices that were much higher than those for the paired white male auditors at the same dealerships 400 more for black females and 1 060 more for black males white female auditors received offers or negotiated prices that were 55 to 129 more than those for white males but the effect was not statistically significant ayres 1995 combined the paired audit data with additional unpaired data gathered in the same study and finds that final offers to white women were 216 higher than to white men and with a p value 0 06 approaching conventional significance levels under the audit technique no tester ever consummated a transaction so ayres and siegelman have no measure of vehicle profit from any sale goldberg 1996 argues that the offers obtained by the auditors do not reflect transaction prices in part because the protocol for the ayres and siegelman study called for auditors to adopt one of two bargaining strategies seller behavior should be different across classes of consumers if the classes have different demands e g different variances of reservations prices or different bargaining strategies goldberg maintains that since different classes of buyers may use different bargaining strategies the offers obtained by the auditors reveal information about seller behavior but not about transaction prices goldberg 1996 uses ces data from 1983 to 1987 to test for price discrimination by new vehicle dealers controlling for a number of variables she was unable to find reliable evidence that blacks or white females received smaller discounts on the manufacturer s suggested retail price msrp than white males the estimation results suggested that white females received discounts that were 130 smaller than those received by white males but the effect was statistically insignificant the gold department of economics virginia commonwealth university box 844000 richmond va 23284 we thank glenn mercer of mckinsey and company for providing us with access to the j d power and associates database