21COE, University of Tokyo MMRC Discussion Paper No. 13

MMRC
DISCUSSION PAPER SERIES

MMRC-F-13

Consumer Attitudes and Automotive Transactions- The Difference Between New-Car and Used-Car Markets in Japan-

Faculty of Business Administration, Rissho University

Masataka Morita
Faculty of Economics, University of Tokyo
and
Economic and Social Research Institute, Cabinet Office,
Government of Japan

Kiyohiko G. Nishimura
October 2004

21COE,Masataka
Universityof Tokyo
MMRC
Discussion Paper No. 13
Morita, Kiyohiko
G.Nishimura

Abstract
This paper examines possible impacts of changing consumer attitudes in the adventof new information and communication technology on the resulting terms andconditions of automobile transactions, through integrating a used-car market and a
new-car market studies coherently. We find that consumers who are active in
information gathering and terms-of-trade negotiation are able to obtain larger pricediscounts of new cars and higher trade-in or sell-off price of their own cars. There issynergy between Internet usage and active information gathering. However, data also
reveal limited rationality on the side of consumers: their negotiation strategy(hard-pressing on new car prices but less aggressive on sell-off prices) is suboptimal.
Also, even though we are in an information age, human factors are shown to be very
important in negotiation.

Keywords
consumer attitude
information and communication technology
new-car markets
used-car markets
synergylimited rationality
survey analysis

Masataka Morita , Kiyohiko G.Nishimura

Consumer Attitudes and Automotive Transactions1- The Difference Between New-Car and Used-Car Markets in Japan -Faculty of Business Administration, Rissho University

Masataka Morita
Faculty of Economics, University of Tokyo
and
Economic and Social Research Institute, Cabinet Office, Government ofJapan

Kiyohiko G. Nishimura
October 2004

1. Introduction
The Japanese automobile market reached a turning point early in the 1990s. After so-called“Bubble Economy” burst around 1990, domestic new-car sales changed gears from an upward
trend to a stagnant or even a downward one. At present, the market is thus in a matured or
saturated stage. Market maturation or even saturation is likely to change the working of themarket profoundly. The days of quantitative growth are over, which were fueled by young car
buyers entering the market. Automobile producers and dealers are now face a stiff competition
among them to attract consumers who know the market very well.
Casual observations suggest consumers are more and more sensitive to prices, as well as
product characteristics and quality. Newspapers and magazines often report that consumers
seem to become more and more information-sensitive. Proliferation of various informational1

The research reported here is partially supported by a grant from the Japan Society for the Promotion of
Sciences in the project on “Information Technology and the Market Economy.” This research is also apart of a larger research project at the Manufacturing Management Research Center of the University ofTokyo. However, the views expressed here are the personal views of the authors and in no way represent
the views of MMRC, JSPS, Rishho University, University of Tokyo, or Economic and Social ResearchInstitute.

2

Consumer Attitudes and Automotive Transactions

sources signifies this trend, ranging from car-price magazines to homepages of dealers andmanufacturers. There are also anecdotes that some consumers have become verynegotiation-intensive: that is, some are becoming tougher negotiators to get good terms andconditions. A natural presumption based on these observations is that consumers who are active
in both information gathering and negotiation get good terms and conditions. On the other sideof the same coin, this means that manufacturers and dealers have to cope effectively with these
active consumers in order to stay profitable.
The first purpose of this study is to examine possible impacts of these changing consumer
behavior and attitudes on the resulting terms and conditions of automobile transactions. To ourknowledge, there is no empirical study of this kind before our study. 2 The lack of research on
this subject is clearly unsatisfactory from the viewpoint of manufacturers and dealers since suchinformation is absolutely necessary to effectively deal with these increasingly sophisticatedconsumers. Such information is also needed for consumers to improve their strategies forgetting good results.
The second purpose of this paper is to integrate a used-car market study and a new-car market
one into one coherent study of automobile markets. As explained earlier, the Japanese
automobile markets have matured. One important implication of this maturation is that many
new-car buyers are also sellers of their then-owned cars at the same time. It is natural to assume
that in such an integrated market of new and used cars, car buying behavior and own-car selling
behavior are interrelated in a complicated manner. Unfortunately however, there are no studies
that explicitly take this interrelationship into account. This study is the first attempt to fill thishuge gap in the literature.
Addressing this hole in the literature is especially important in the context of the Japanese
automobile markets. In Japanese used-car markets, a new business format has emerged since
early 1990s, which specializes solely in purchasing used cars from consumers. For many years,
Japanese consumers had no alternative to trading in their then owned cars for new ones at
new-car dealerships. However, these "purchasing-only" outlets have changed this old custom in
an important way. This change can be interpreted as one way of “modularization” or“de-coupling” in which trade-in-negotiation processes are separated from new-car-selling
negotiation processes.
This is clearly a sign of the growing trend of unbundling and modularization in theautomobile retail industry. It is of utmost importance to investigate how consumers react to thisnew trend.
This paper is organized as follows. In Section 2, we briefly describe two surveys we
2

Scott Morton et al. (2001) analyzed the effect of online referral services on prices. However, there arevery few researches investigating the effect of behavioral and attitudinal factors on prices.

3

Masataka Morita , Kiyohiko G.Nishimura

conducted in 2001 to discern the effects of consumers’ information-gathering activities andnegotiation intensity on the terms and conditions of their automobile transactions. There we
carefully examine whether our samples are representative of Japanese customers, and if they are
not, investigate what kind of biases are present in our sample. In this way, we can infer about
Japanese consumers in general in less biased ways. Then, we investigate the effects of
information gathering and negotiation intensity on price discounts in new-car markets (Section3) and on trade-in or selling-off prices in used-car markets (Section 4). In Section 5, we further
examine the effects of the Internet. Finally, we conclude the paper in Section 6, with discussion
about the major findings of this study.

4Consumer Attitudes and Automotive Transactions

2. New-Car Buyers and Own-Car Sellers in Two 2001 Automobile User
Surveys2.1. Automobile User Surveys

In this paper, we examine the possible effects of consumers’ attitudes and behavioral patterns
on consumers’ success in getting better terms and conditions in the purchasing of new cars andin the selling of their then-owned cars. In particular, we investigate whether consumers
effectively employ available means to achieve this goal. Since the development of informationand communication technology (ICT) culminating in the advent of the Internet is the mostnotable change in consumers’ environment,3 we also investigate the effect of the Internet on
consumers’ behavior, especially its ultimate effect on consumers’ ability to get better terms oftrade.
To discern car-buying and car-selling behavior of Japanese consumers, we use the results of
two interview-based surveys designed and implemented in 2001 under the supervision of theauthors. The first one is a survey conducted in March jointly with Japan Automobile Dealers’
Association, which contains survey questions about new-car buyers to examine new car buying
behavior. The second one is a survey conducted in September jointly with Gulliver International,
Inc., which contains survey questions about consumer behavior regarding the selling of their
then-owned cars. The Nippon Research Center (NRC) implemented these two surveys under thesupervision of the authors.4
Table 1 shows major survey items in these questionnaires, except for general demographic
items such as age, sex, annual income, education, type of occupation (blue-collar or whitecollar) and so on, which are not shown to save space. Also there are several questions specific toonly one of the surveys, as indicated accordingly. It should be noted here these surveys containmore information than we used in this paper. For example, the March survey, coupled withearlier surveys, was used to examine changing attitudes of automobile owners before and after
the advent of the Internet (Morita and Nishimura 2002).
2.2. Identification of New-Car Buyers and Own-Car Sellers in the Surveys

In order to get a picture of Japanese consumers that is as unbiased as possible, we proceededin the following way. At the outset, we specified the target of our study (that is, the “population”
in statistical terminology) as “Japanese private automobile drivers with valid licenses,
nationwide except for Okinawa”. We then used the following three-step method to get relevantsamples from this population.
3
4

See, for example, Nishimura and Morita (2002).
They were partly based on NRC’s Automobile Owners Omnibus Survey data bank.

5

Masataka Morita , Kiyohiko G.Nishimura

The first step was to apply a multi-stratified, two-stage5 random cluster sampling method
based on resident registration records of local governments. Using this method, we obtained
6,600 samples in 600 sampled areas. These samples, however, might not be automobile drivers
with valid licenses.
Consequently, in the second step, we randomly chose 2,000 automobile drivers from among
all of the automobile drivers in the 6,600 samples, and attempted to interview them twice. First,
interviews were conducted between March 12 and 23, 2001. Then, interviews were conducted
between September 10 and 21, 2001. However, not all of 2,000 chosen samples cooperated inour surveys. The number of respondents was 1,496 (74.8%) in the March survey and 1,493(74.7%) in the September survey. However, from past experience, we deemed it reasonable toassume that there was no significant sample bias caused by this procedure we used since thenon-response was rather random.6
The main purpose of this study was to examine how consumers’ attitudes and behavioral
patterns toward car buying and car selling would affect price discounts of new cars and selling
prices (or trade-in) prices of their own cars. Thus, we should control, in particular, the market
value of the cars in question in our study, since buying and selling prices are likely to be highly
correlated with the market value, regardless of consumers’ attitudes and efforts in car buying
and selling. We used the Yellow Book7 for relevant price information of the market value ofparticular cars in question. The Yellow Book contains price information about the wholesale
price of used cars among dealers. It should be noted that the Yellow Book is mostly concernedwith mainstream used cars. It does not cover imported models and models of limited sales
quantity, since there is an insufficient number of transactions for these models making price data
unreliable.
Taking these facts in mind, we proceeded in the following way in the third step.
For new car buyers, we first removed from our samples those who did not buy a new car in
the first place and those who failed to report about price discounts in the March survey (whichcontained questions about new car buying behavior). We then picked up only those respondents
whose cars were listed in the end-of-the-year Yellow Book for that year. Among 1,494
respondents in the March survey, 1,148 bought a new car, and among them 835 reported about
price discounts. They are the base samples of our analysis of new-car buyers. Among these 835
base samples, Yellow Book prices were available for 516. We call them the mainstream samples,
since the Yellow Book reports prices of only mainstream models. Thus, the number of
5

The first stage is among regions and the second stage is among cities.
The survey is conducted regularly under the sponsorship of Japan Automobile Dealers’ Association.
There has been no evidence indicating that this procedure has serious sampling biases.
7
The Yellow Book is published by Japan Auto Appraisal Institute. Unfortunately however, they have notbeen made electronically accessible, especially for earlier issues. Thus, we were obliged to gather thisprice information manually, scanning over pages of the publication each year.
66

Consumer Attitudes and Automotive Transactions

mainstream samples was 516 in our analysis of new-car buying behavior.
As for own-car sellers, we removed from our samples those who did not report selling pricesof their then-owned cars in the September survey (which contains questions about own-car
selling behavior). We then picked up only those respondents whose cars were listed on the
Yellow Book. Among 1,493 respondents in the September survey, 823 reported selling prices.
They are the base samples of our own-car-selling behavior study as in the new-car buyer case.
Among them, Yellow Book prices were available for 496. Thus, the number of mainstream
samples was 496 in our analysis of own-car selling behavior.
2.3. No Noticeable Sample-Selection Bias in Our Samples of New-Car Buyers

Let us now turn to the issue of whether the procedure explained above leads to a relatively
good representation of Japanese new-car buyers and own-car sellers.
In Table 2-1, we examine whether our base samples of new car buyers (835 who reported
about price discounts) are in any way different from the rest (313 who did not report about pricediscounts). We pick sex, size categories of their cars (which are strongly correlated with income
levels), Internet usage, and PC usage (which are strongly correlated with education levels). We
conducted Pearson's chi-square test to determine whether there is significant difference between
the two groups for each item. The term P in this table indicates the significance level.
Table 2-1 shows that there is no noticeable bias in our sampling procedure and our samples of
new car buyers are a good representation of new car buyers in Japan. In all items we selected,
none shows statistically significant difference between our samples (those reported about pricediscounts) and the rest of the samples.
2.4. A Bias in Our Samples of Own-Car Sellers Toward High-Income High-Education
Segments

As for our base samples of own-car sellers, it turns out that there is a sample selection bias
toward high-income, high-education segments. To see this, we conducted the same procedure asin the previous sub-section to own-car sellers. Table 2-2 reports the result.
This table shows that those in our base samples who reported their selling prices earnconsistently higher income and have higher education than those outside our samples who did
not report about selling price. Our base samples have larger cars (surrogate of higher income)and their usage of the Internet is higher (surrogate of higher education). Although it is notstatistically significant, the percentage of PC usage is also higher among them.
These results show that, while our base samples of new car buyers has no noticeable bias, oursamples of own-car sellers are somewhat biased toward high-income high-education segmentsof the population. We should keep this property in mind in interpreting the following analysis.

7

Masataka Morita , Kiyohiko G.Nishimura

Finally, Table 2-3 compares new-car buyers and own-car sellers in our samples. As expected,
these two samples are different. Own-car sellers have larger cars (surrogate of higher income)and a higher usage of the Internet and PC (surrogate of higher education).
2.5. Market Value Evaluation

There is one important addition to our data set of the survey results, which is the market valueof the same used cars models. As explained briefly before, a consumer’s selling price of his own
car should depend on the market value of the same used car model, so long as consumers use
price information effectively. Moreover, price discounts on new cars should reflect themagnitude of “overpricing” in manufacturer’s suggested retail price (hereafter we call it MSRP)
over the “true market value,” which should be reflected in the market value of used cars of thesame model in the following year, again so long as consumers use price information effectively.
Thus, we expect the market price of same-model used cars should be an important determinantof both price discounts in new-car buying and selling prices in own-car selling.
As explained earlier, we use the Yellow Book for this purpose. In the new-car buying study,
we employ the average price of each model, between the maximum and the minimum of all
grades of the same model, in the end-of-the-year issue of the Yellow Book of one year after
purchase. In the own-car selling study, we use the average price of each model, between the
maximum and the minimum of all grades of the same model, in the end-of-the-year issue of the
Yellow Book of the year a particular car was sold.
An appropriate measure of getting good terms of trade is the size of price discounts innew-car buying and the level of the selling prices in own-car selling. Consequently, we regressprice discounts and selling prices on behavioral and attitudinal characteristics, to examine theireffects on the outcome of negotiation. As clarified later, we put a special emphasis on
information gathering and negotiation tactics.

8

Consumer Attitudes and Automotive Transactions

3. Consumer Behavior and New-Car Price Discounts
In order to investigate the effects of behavioral and attitudinal characteristics of a consumer
on price discounts in new car buying, we proceed in the following way. As usual, we assume alinear model of price discounts in which behavioral and attitudinal characteristics as well as themarket value determine price discounts. We then use a so-called “iterative variable-reduction
method.” In this procedure, we first put all relevant variables (of which the list is shown in Table
A.1 in the Appendix) as explanatory variables in the regression. We then drop the leastsignificant variable one by one, until only statistically significant variables with at least a 10%
significance level are left in the regression.8 However, there is one exception, which is themarket value variable. We use the difference between MSRP and next-year-end Yellow Book
price (YB_SA_AV) of the same model as its market value, and keep it no matter whether it issignificant or not for theoretical reasons explained earlier.
3.1. Market Value

Table 3 reports the result. First and the most striking finding is that the market value variable
YB_SA_AV is not at all significant. Since in theory it should have a strong effect on the size of
price discounts, this finding is very perplexing. If consumers use price information effectively,
then price discounts should be just another way of price reduction. If demand is short of supply,
then the price should go down and thus price discounts should go up. However, the result
reported in Table 3 defies this economic reasoning.
3.2. Information Gathering

Let us now turn to information gathering. Table 3 confirms our prior conviction that active
information-gathering increases price discounts while mere passive information-gathering
decreases them, other things being equal. Information gathering intensity (I205), active
information gathering in the form of going to exhibitions and test driving (I207_05) and theusage of third party information (I209_02) increase price discounts. In contrast, passive
information gathering of reliance on direct mail and brochures of dealers (I1209_04) reduces
price discounts, other things being equal. It should be noted that this table does show the effectof consumer behavior but does not show whether these particular practices increase nor
decrease price discounts. The table indicates that consumers who tend to employ these tactics
obtain the reported results.
3.3. Negotiation Tactics

With respect to negotiation tactics and intensity, we also get results confirming our
8This procedure is carried out by SPSS version 10.0.7J.

9Masataka Morita , Kiyohiko G.Nishimurapresumption that the more intensively consumers negotiate, the more price discounts they get,except for one category discussed later. The more frequently consumers negotiate both in the
dealership (R101) and away from the dealership (mostly at their home, R011), the more pricediscounts they get. The longer they negotiate, the more concession they obtain (R012).
There is one exception in the above characterization. An aggressive attitude toward
negotiation does not increase but rather decreases the concession. If a consumer uses a very
aggressive tactic of making not only salespersons but the manager of the dealership get involvedin negotiation (I212_06), which is a very aggressive tactic under the Japanese standard, theconsumer rather gets a negative result when other things are controlled to be equal. To put it
differently, although information empowers consumers, their aggressiveness may backfire.
This attitudinal effect may be closely related to the effect of human touch appreciation. The
Table also shows that consumers who appreciate salespersons’ active involvement in finding out
the best-suited car get a larger discount (I220_08).Together with the point we made in theprevious paragraph, this may show the importance of human factors in getting good results,
which are often overlooked in the theories of economics.
3.4. Involvement Factors

The effects of involvement in cars have rather mixed results. When consumers are highly
involved in cars and car styling (I198_4) and determine a particular model to buy well inadvance (I198_1), they get a good discount. However, if the consumer has simply a high generalinterest level in cars (I223) and thinks attractive sedans are now available to buy in the market,
he obtains a negative result.
These rather mixed results can be explained in the following way. Consumers who care aboutstyles specific to particular models are more motivated than consumers who compare merely
functions and options among various models. A similar characterization applies to consumers
who determine a particular model to buy well in advance. It is quite natural to assume that
motivated consumers are keener to get good results, both financially and product-wise (that is,
options etc.).
The reason that those who are motivated to buy through the release of new attractive sedans
fail to get attractive discounts, may be specific to the Japanese automobile markets. In recent
years, mass-marketed sedans are the most inexpensive compact sedans so that price discounts
are relatively small in the first place. Moreover, price discounts are slim immediately after new
release of new models. Since those responding that the release of new attractive sedans
motivated them to buy are likely to have purchased just after the release, the price discounts
they get are rather small.

10Consumer Attitudes and Automotive Transactions

3.5. Mini-car Factors.

Finally, manufacturer-specific dummies, Suzuki (I410_2) and Daihatsu (I410_3)show anegative sign. This can be interpreted as referring to the relative size of price discounts on“mini-cars”, which are the main product lines of Suzuki and Daihatsu. Honda also has mini-cars
in its product line, so that statistically weakly significant negative result for the Honda dummy
may conform to the above result with respect to Suzuki and Daihatsu. The size of pricediscounts is smaller for mini-cars, which generally have lower prices.99Mitsubishi, Mazda, Subaru, and other companies also have mini-car lines, but they do not havesignificant mini-car dummies.

11

Masataka Morita , Kiyohiko G.Nishimura

4. Consumer Behavior and Own-Car Selling Prices
A similar procedure to the new-car buyer case is applied to the own-car seller case. We
assume a linear model of selling prices in which behavioral and attitudinal characteristics aswell as the market value determine selling prices of consumers’ then-owned cars. We then use
an iterative variable-reduction method, in which we first put all relevant variables (of which thelist is shown in Table A.2 in the Appendix) as explanatory variables in the regression. We thendrop the least significant variable one by one, until only statistically significant variables are left
in the regression. As for the market value information, we use the average price of each model
between the maximum and the minimum of all grades of the same model in the year-end issueof the Yellow Book of the year this particular car was sold (YEL_AVE).
4.1. Market Value

Table 4 reports the result. First, in contrast to the new-car buyer case, the Yellow Book priceis strongly statistically significant at the 1% level of significance. This result shows thattrading-in or selling-off price of consumers’ then-owned car properly reflected the market value.
Moreover, the adjusted R square of this regression is much higher than that in the new car
buying case. This clearly suggests that own-car selling prices were much more systematic andpredictable than new-car price discounts.
4.2. Interference of Buying in Selling?

There is another remarkable result in this table about a consumer who simultaneously buys a
new car and sells (or trade in) his then-owned car. The table shows an intriguing result that thebuyer-seller who eagerly gathers information about price discounts of new cars sells his
then-owned car for a lower price (Q4_2). Similarly perplexing is the finding that the longer ittakes from the start of negotiation to its closing, the lower is the selling or trade-in price (Q5-2).
This is in sharp contrast to the fact (O4_3) that the buyer-seller who is eagerly seeking
information about selling prices of his then-owned car is able to sell it for a higher price. We
will discuss implications of this finding in Section 6 in more detail.
4.3. Information Gathering

Let us now consider the nature of information gathering activities. As in the new car buying
case, active information gathering rewards a consumer whereas passive one does not.
Information gathering through third-party informational sources such as journals andnewspapers (Q4_6_2) leads to a higher selling price. In contrast, passive one such as perusing
manufacturers’ homepages (Q4_4_11) and getting information from TV and radios (Q4_6_1)
correlates negatively with the selling price.

12

Consumer Attitudes and Automotive Transactions

In the same token, consumers who are more active in seeking wider selling venues are
rewarded substantially. Selling their own cars to dealers or outlets other than the dealer fromwhich they buy their new cars leads to a higher selling price (Q8_4). Similarly, consumers who
obtain other dealers’ price quotes of their own car get a higher selling price (Q10_1).
4.4. Negotiation Tactics

As for negotiation tactics, findings are largely consistent with our prior expectation of astrong correlation between active negotiation and high selling prices. As expected, the more a
consumer negotiates about trade-in prices, the higher is the trade-in price (Q13_2). In contrast,
passive negotiation leads to a lower selling price. A consumer who responded to the question ofwhat is the “reason to adopt the particular way of selling one’s car” by stating that “do not know
other ways” ends up with a lower selling price (Q9_6).
With respect to the effect of appreciating human touch, we find the same result as in new car
buying. A consumer who responded to the same question by stating that

“employees of thecompany are reliable” obtained a higher selling price, indicating that a positive attitude toward
human touch is an important behavioral characteristic in getting good results even in own car
selling.
4.5. Attitudes toward New Venues

Next, let us consider the attitudinal difference among consumers with respect to new sellingvenues of used-car-buying companies and the effect of this difference on selling prices.
Consumers who responded to the question of why they do not use such venues by stating“trade-in price becomes higher when it is combined with new-car price discounts” (Q22_1)
have a higher selling price. This attitude is quite reasonable, and the result is not surprising. In
contrast, consumers who responded to the same question in a not so reasonable way such as bystating that they “have an acquaintance in the dealer” (Q22_4) and “do not know its system”(Q22_7) are unable to obtain discounts.
4.6. Internet usage

Unlike new car price discounts, Internet usage has a significant effect on own car selling
prices (INET). We will discuss this issue in more detail in Section 5.
4.7. Other findings

In Table 4, we find that consumers in their teens and twenties (F2_2_2), living in the central
part of Japan (I401_3), and owning mid-size (F13_2_2) and RV (F13_2_5) obtain a higher
selling price. These findings are consistent with the fact that (1) young consumers have more13

Masataka Morita , Kiyohiko G.Nishimuratime and energy to negotiate intensively than older generations, (2) competition is fiercer in thecentral part of Japan, especially in Aichi prefecture where Toyota's headquarters is located, and(3) mid-size cars and RVs are more popular than other car types in used-car markets.
The table also shows that consumers obtain a high selling price who responded to thequestion about the “reason to adopt the particular way of selling one's car” with the statementthat a “good price is expected (Q9_4).” Similarly, consumers who respond to the question ofpurchase motivation by stating attractive trade-in price (Q2_9) also get high prices. This may
indicate that they have enough information backing their prospects and thus their selling price isactually high. In contrast, those who urgently need a car because of an accident (Q2_7) obtainlower selling price simply because of devaluation caused by these accidents.

14

Consumer Attitudes and Automotive Transactions

5. Effects of the Internet
In this section we examine in more detail how the Internet affects new car buying and own
car selling behavior. The following Table 5 shows the difference between Internet users andnon-Internet users with respect to the size of price discounts and the level of selling prices.
This table shows a clear difference between new car buying and own car selling. We see very
little difference between Internet users and non-Internet users in new car buying while we find asizable difference in own car selling. This is consistent with the regression results of theprevious sections. We have put an Internet usage dummy and have examined its effect on thelevel of price discounts and selling prices. As explained earlier, the Internet dummy has beenshown to be insignificant in new car price discounts, but strongly significant in own car selling
prices.
In this section, we go further and ask whether Internet usage strengthens or weakens
individual effects of explanatory variables. A natural way to investigate this issue is to put across-term of each explanatory variable and the Internet usage dummy in the regression. Thus,
we put these cross-terms into the regression equations of Sections 3 and 4, and examine thedirection of their effects and their statistical significance.
5.1. No Effect of the Internet in New Car Buying

Table 6 shows the result in the case of new car buying. As evident in this table, there is no
statistically significant individual effect of Internet usage. All cross terms are insignificant. Thus,
the results obtained so far suggest that, as of March 2001, the Internet was not yet a dominantfactor in changing Japanese new car markets. This is a sharp contrast with the U.S. new car
markets, where the Internet was and is a decisive factor in price negotiation.
5.2. Synergy between Internet Usage and Active Information Gathering

In contrast, Table 7 shows the Internet has become an important factor in own car selling in away specific to Japanese market conditions. It should be noted that, as of September 2001, theInternet in Japan was at most a new source of information rather than a new venue oftransactions. Thus, the difference between Internet users and non-user is simply the amount ofaccessible information. As it has been shown in Section 4, own-car selling prices reflect themarket value systematically. This suggests that Internet-using active information-gathering
activities are effective in own-car selling.
Although Internet users had an informational advantage over non-Internet users, they after all
have to visit actual brick and mortar stores to sell their cars. This suggests a deeper hypothesis
that, Internet usage could make a difference only if it is coupled with active information
gathering and negotiation. Table 7 confirms that this is the case.

15

Masataka Morita , Kiyohiko G.Nishimura

In fact, Table 7 reveals that, the fact that the consumer obtains a higher selling price when hesells to a dealer other than the dealer from whom he buys a new car, is for Internet users and notfor non-Internet users (Q8_4 and INET*Q8_4). Internet users have a large, significant
coefficient of Q8_4, but this is offset by INET*Q8_4 for non-Internet users and ends up with anegligible coefficient. These results support our hypothesis.
The result with respect to the question of why consumers do not use a new selling venue of
used-car buying companies also confirms our hypothesis. Internet-using consumers who
responded this question by stating “do not know its system” are unable to obtain a higher selling
price (Q22_7), while this effect is offset by INET*Q22_7 substantially for non-Internet using
consumers. Internet usage makes a difference again only if it is coupled with active information
gathering.
5.3. Hearsay Information and Non-Internet Users

Table 7 also suggests, though vaguely, another difference between Internet users andnon-Internet users with respect to passive information gathering. In contrast to Internet users,
non-Internet users are far less informed about the market, and are likely to be heavily dependent
on the information of the salespersons they know. Through these salespersons they obtain
information and form expectations about the market. From this perspective, it is not a surprise tofind in Table 7 that those non-Internet users who obtain a higher selling price are those who
expect a good price (INET*Q9_4), while this has no effect for Internet users, who depend on
active information gathering rather than passive information from salespersons (Q9_4).
5.4. Trade-off between Information Gathering and Intensive Negotiation

Finally, In Section 4, we obtained a perplexing finding that the longer it takes from the startof negotiation to its closing, the lower is the selling or trade-in price. Table 7 shows that this is
the case for Internet users (INET*Q5_2) but not for non-Internet users (Q5_2 and INET*Q5_2).
Since Internet users are supposedly those who engage in active information gathering, this result
suggests that there is a trade-off between information gathering and intensive negotiation, which
we will discuss in the next section.

16

Consumer Attitudes and Automotive Transactions

6. Discussion and Conclusion: Attitudinal Differences and Limited
Rationality in Consumer Behavior
6.1. Summary of Results: Consumers’ Attitudinal Differences and Automotive
Transactions

The results of regression analyses explained in the previous three sections largely confirm ourhypothesis that attitudinal and behavioral differences among consumers matters substantially inobtaining price discounts in new car markets and getting higher trade-in or selling-off prices in
used-car markets. Generally speaking, we find that consumers who are active in information
gathering and terms-of-trade negotiation are able to obtain better results (larger price discountsof new cars and higher trade-in or sell-off price of their own cars). Moreover, we find asignificant effect of the Internet in used-car markets, both on the level (Section 4) and individual
effects of the explanatory variables (Section 5). This suggests the existence of synergy between
Internet usage and active information gathering, although there is a caveat of a sample selection
bias in our used-car samples toward high-income, high-education segments of consumers.
Thus, to put in a nutshell, we found that consumers’ attitudinal differences do matter in theireffectiveness in price negotiation. This implies there is room for a business strategy of
informational “divide et impera” (divide and rule): if firms can segment their consumers withrespect to their attitudes toward buying and selling, they can get better terms of transaction
conditions to improve profitability. This attitudinal segmentation has not been explored before.
As free information about automobiles becomes increasingly wide-ranged so that informational
segmentation is increasingly difficult, attitudinal segmentation is likely to become a more
attractive alternative.
6.2. Consumers’ Rationality May Be Limited In Getting Better Prices in New Car Buying

Among the results obtained so far, the most striking finding is that new-car price discounts
had no correlation with the difference between new cars’ MSRPs and their market values, eventhough own-car selling prices are closely correlated with the cars’ market values. If consumers
use price information effectively, both new-car price discounts and own-car selling prices
should be dependent on the market value of a particular car. This suggests that a striking
difference exists between new-car markets and used-car ones. Thus, consumer behavior in new
car markets shows a sign of limited rationality, even though consumer behavior in used-car
markets is consistent with full-fledged rationality.
6.3. Consumers’ Rationality Is Limited In the Choice of Tactics

Equally perplexing is the fact that the choice of consumers with respect to tactics to get best17

Masataka Morita , Kiyohiko G.Nishimura

financial results does not seem fully rational.
For example, the more intensively a consumer engaged in information gathering about newcars he wanted to buy, the lower was his selling price of his then-owned car. To put it differently,
seeking good terms in new car buying and seeking good terms in own-car selling were in a
trade-off relationship in our samples of new car buyers. A similar result is found even in Internet
users. Active information-seeking Internet users who at the same time adopted an intensive
negotiation tactic of prolonging negation with salespersons and dealers, ended up in obtaining
lower selling prices of their then-owned car.
To put the trade-off in a quantitative way, Tables 3 and 4 show that one more negotiation
about a new car price increased price discounts by about 10,000 yen, while one morenegotiation about the trade-in price increased the trade-in price by about 30,000 yen.
Furthermore, if the consumer got quotes from other dealers and used-car buying companies thenhe could raise his selling price by about 100,000 yen. Taking account of these numbers, it isevident that to put more efforts on activities of getting higher selling prices pays far more thanto obtain larger price discounts. Consequently, it is rather perplexing to see that consumers are
eager to negotiate hard to get price discounts, rather than put more efforts in getting higher
selling price of their own cars.
It is not certain that this limited rationality is a transitory phenomenon that may fade away asconsumers get more and more sophisticated in gathering information and negotiating prices.
However, there may be a possibility that consumers weigh new-car price discounts far moreheavily than higher trade-in prices in their psychological calculations like consumers studied by
Kahneman and Tversky. If this is the case, then it might be possible to construct a businessstrategy to take advantage of this trait of consumers.
6.4. Implications for Business Strategy

The main findings in this research are two points. One is that there is still a limit in consumer
cognition and information processing capability in the information society. Another is that amarginal value of information processing capability still varies with each consumer. Thesefindings suggest a possibility of strategies taking advantage of these traits of consumers.
When purchasing a new car, a consumer focuses his/her attention on new car buying andhe/she puts rather less emphasis on the negotiation on terms and conditions of own-car selling.
Thus, a dealer can earn profits from the trade-in process of a used car to which a new car buyer
puts less importance. After all, he/she seems to obtain more satisfaction in new car discounts
than high own-car selling prices. Consequently, the dealer can bundle the sales of a new car anda used car trade-in to satisfy his client and to earn profits. Actually, this strategy is often foundamong Japanese automobile dealers.

18Consumer Attitudes and Automotive Transactions

In the same token, an automobile dealer can segment the market according to differences in
information processing capability among consumers. Some car buyers acquire abundant
information from various sources and are quite positive towards tough negotiation, while others
are not. In spite of rapid progress in information technology and its swift diffusion, the result of
this research shows that the market is still far way from perfect information. In fact, contrary to
the hope of some advocates of information technology, the Internet has actually widened
information gap among consumers. Consequently, an automotive dealer can increase his/her
effectiveness in dealing with his/her clients if he/she knows the amount of information and thenegotiation power that his/her clients possess.
Sources of information that a buyer has may serve as a key. If a consumer appears fond ofand contacts sources of information that require active gathering represented by the Internet,
then the a possibility of this consumer having acquired more information is high. Then the
dealer should adjust its selling strategy accordingly. In contrast, for the consumer who is mainly
in contact with passive sources of information and the consumer who does a blind purchasefrom a traditional channel, the dealer can improve its image and at the same time earn profits by
tailoring its selling strategy toward a more human-touch-oriented one, as we have amply
showed in previous sections. This implies an importance of attitudinal segmentation we haveargued before. For that purpose, the amount and sources of information can be a good predictor.
Unfortunately to date, field sales persons are left to individually measure each customer's
attitude to ward negotiation or “toughness”. It may be possible to substitute for this inefficientheuristic approach to some extent simply by using systematic evaluation of the amount andsources of information contacted by each customer.
So far, two strategies were proposed above under the assumption that consumers' cognitive
limitation is given. Then, there may be yet another strategy that changes this cognitive limitationof consumers, rather than taking it as given. It can be called an “unbundling” or “modular”
strategy, an example of which is to separate the trade-in process from a new car sale. In fact, wehave witnessed a successful entry of new business format that essentially performs this function,
which is the so-called "used-car purchasing-only outlet". These outlets specialize in buying aused car from consumers by offering a higher price than can be obtained as a trade-in price. The
service also simplifies the procedure of own-car selling.

19

Masataka Morita , Kiyohiko G.Nishimura

References
Kahneman, Daniel, and Amos Tversky, 1973, “On the Psychology of Prediction,”
Psychological Review, 80, pp. 237-251.
Morita, M., and K. G. Nishimura, 2002, “Alienation in the Internet Society: Changes in Car
Buyer Attitudes in the Japanese Automobile Industry,” International Journal of Automobile
Technology and Management, 2 (2), 190-205.
Nishimura, K. G., and M. Morita, 2002, “Information Technology and Automobile
Distribution: A Comparative Study of Japan and the United States,” International Journal ofAutomobile Technology and Management, Management 2 (2), 206-237.
Peter, J. Paul, and Jerry C. Olson, 1996, Consumer Behavior and Marketing Strategy, fourth
edition, Irwin.
Schelling, T. C., 1988, “The Mind as a Consuming Organ,” Bell, David, Howard Raiffa, andAmos Tversky eds., Decision Making, Cambridge University Press.
Scott Morton, F., F. Zettelmeyer, and J. Silva-Risso, “Internet Car Retailing,” Journal ofIndustrial Economics, 49(4), 501–520.
Tversky, Amos, and Daniel Kahneman, 1973, “Availability : A Heuristic for Judging
Frequency and Probability,” Cognitive Psychology, 4, pp. 207-232.
Tversky, Amos, and Daniel Kahneman, 1974, “Judgment under Uncertainty: Heuristics andBiases”, Science, 185, pp. 1124-1131.

20

Consumer Attitudes and Automotive Transactions

Table 1: Survey Questions Revealing Buyer Attitudes
SurveyCommon in two surveys
Common in two surverys
Common in two surverys
Common in two surverys
Common in two surverys
Common in two surverys
Common in two surverys
Common in two surverys
Common in two surverys
Common in two surverys
Common in two surverys
Own-Car Seller Survey Only
Common in two surverys
Common in two surverys
Own-Car Seller Survey Only
New Car Buyer Survey Only
New-Car Buyer Survey Only
New-Car Buyer Survey Only
Own-Car Seller Survey Only
Common in two surverys
Common in two surverys
Common in two surverys
Common in two surverys
Common in two surverys
Common in two surverys
Common in two surverys
Common in two surverys
Common in two surverys
Common in two surverys
Common in two surverys
Common in two surverys
New-Car Buyer Survey Only

Question
Where the respondent purchased the present car he/she possesses
Model name of the purchased car
Purchase motive of the particular car
How the respondent determined the particular modelInternet use at the time of car purchase
How the respondent sold his/her then-owned car
Choice of option parts
Need for customization of the car
Magnitude of involvement in purchasing the present car
Intensity of the information gathering efforts about products
Intensity of the information gathering efforts about price discounts
Intensity of the information gathering efforts about selling prices of the then-owned car
Sources of information in determining the list of candidate models
Sources of information in choosing the particular model
Sources of information in choosing the particular venue of selling then-owned
Selling price of the then-owned car
Amount of price discounts the respondent got
Actions taken to obtain the discountActions taken to obtain the higher selling price
Whether the purchase of the car was pleasant or not
Length of search period
Length of negotiation period
Number of negotiations
Length of one negotiation
Opinion on discounting practices
Satisfaction level with respect to the particular car
Satisfaction level with respect to the discount the respondent got
Level of interest in the car in general
Dependence on human sources of information
Kind of efforts most often made in purchasing the particular car
Internet usage
Willingness to use electronic commerce in purchasing a car

Note: See the text.

21

Masataka Morita , Kiyohiko G.Nishimura

Table 2-1. No Sample Selection Bias: New-Car Buyers

Sex (% of Male)
Size Category: Large
Size Category: Medium
Size Category: Small
Size Category: Mini
Size Category: RVInternet Usage (%)
PC Usage (%)
Note: Authors' calculation.

non-Reported
N=313
61.0%
5.1%
24.3%
14.4%
16.0%
40.3%
31.8%
41.8%

Reported
N=835
61.4%
6.3%
22.5%
17.1%
17.6%
36.4%
32.7%
44.8%

Significance
Level
P>0.1

P>0.1

P>0.1
P>0.1

Table 2-2. A Bias Toward High Income High Education Segments: Own-Car

Sex (% of Male)
Income: nothing
Income: less than 2 million yen
Income: less than 3 million yen
Income: less than 4 million yen
Income: less than 5 million yen
Income: less than 7 million yen
Income: less than 9 million yen
Income: more than 9 million yen
Education: - Junior high school
Education: Senior high school
Education: Special school
Education: Junior college
Education: college Size Category: Large
Size Category: Medium
Size Category: Small
Size Category: Mini
Size Category: RVInternet Usage (%)
PC Usage (%) 46.8%
Note: Authors' calculation.

non-Reported
N=446
50.4%
23.6%
22.8%
13.2%
13.7%
6.3%
10.4%
5.3%
4.6%
8.1%
51.6%
8.7%
11.0%
19.5%
6.8%
32.7%
27.8%
18.1%
12.2%
32.1%
51.0%

22

Reported
N=825
62.8%
17.2%
16.9%
12.4%
10.7%
11.1%
16.9%
8.1%
6.7%
5.0%
45.8%
12.6%
10.4%
25.7%
7.3%
35.3%
24.5%
12.8%
18.8%
39.1%
P>0.1

Significance
Level
P<0.01

P<0.01

P<0.01

P<0.01

P<0.05
P>0.1

Consumer Attitudes and Automotive Transactions

Table 2-3 Difference Between New Car Buyers and Own Car Sellers

Sex (% of Male)
Mode Income Level
Mode Education Level
Size Category: Large
Size Category: Medium
Size Category: Small
Size Category: Mini
Size Category: RVInternet Usage (%)
PC Usage (%) 41.1%
Note: n.a. = not available

New-Car Buyer
N=516
62.6%
n.a.
n.a.
7.6%
24.8%
18.0%
16.5%
33.1%
30.6%
51.8%

23

Own-Car Seller
N=496
62.1%
5 to 7 million yen
senior high school
6.7%
32.7%
25.6%
13.1%
22.0%
39.1%
P<0.01Significance
Level
P>0.1
n.a.
n.a.

P<0.01

P<0.01
P<0.01

Masataka Morita , Kiyohiko G.Nishimura

Table 3.

New-Car Buying: Effects of Behavioral Characteristics on Price Discounts

Dependent variable = Amount of price discounts (in 10 thousand yen)
Method of Estimation: OLS, Number of samples = 516
Variable
I197_02
I198_1
I198_4
I205

I207_05

I209_02

I209_04

I212_06

I220_08

I223

Characteristics

Detailed Description

Involvement in
Cars
Involvement in
Cars
Involvement in
Cars
ActiveInformation
Gathering
ActiveInformation
Gathering
ActiveInformation
Gathering
Passive
Information
Gathering
ActiveNegotiation:
Aggressiveness
ActiveNegotiation:
Human Touch

Purchase Motivation: Attractive
sedan is launched
Determinants in model choice:
Have decided the model well in
Determinants in model choice:
Style
Information-gathering intensity
about cars (5 point scale; 1: very
passively -- 5: very actively)
Kind of information used indetermining candidates:
Exhibitions and test drives
Kind of information used indetermining a particular model:
Newspapers and journals
Kind of information used indetermining a particular model:
D.M.s and brochures
How to get good terms andconditions: Have the manager
participate in negotiation
Attitudes to Price Negotiation:
Rather, dealers should look for thebest car together.
Interest level about the car ingeneral (4 point scale; 1: totallyuninterested -- 4: very interested)
Number of negotiations at the
dealer store
Number of negotiations outside thedealer store

Involvement in
Cars

Negotiation
R010
Intensity
Negotiation
R011
Intensity
Negotiation
R012
Length of one negotiation
Intensity
Other non-behavioral variables
Manufacturer
Manufacturer: Suzuki
I410_2
Specifics
Manufacturer
Manufacturer: Daihatsu
I410_3Specifics
Manufacturer
Manufacturer: Honda
I410_9Specifics
YB_SAMarket Price New Car List Price minus Yellow
AV
Differential
Book Used-car Price of the model
Adjusted R square = 0.120, F = 5.121 (p < 0.001)+: P <0.1, *: P <0.05, **: P <0.01

24

CoefficientSignificancet -value(beta)
Level-5.999-2.3090.021 *

2.642

1.890

0.059 +

4.385

1.958

0.051 +

1.117

1.923

0.055

+
3.160

2.106

0.036

*
2.768

1.751

0.081

+
-4.564-3.1550.002**-8.504-3.054

0.002

**
3.681

1.895

0.059

+
-2.370-2.410

0.016

*
0.813

2.064

0.040 *

1.248

2.695

0.007 **

0.069

2.910

0.004 **

-6.141-2.1020.036 *

-11.483-4.2210.000 **

-3.865-1.6680.096 +

0.001

0.494

0.621

Consumer Attitudes and Automotive Transactions

Table 4. Own-Car Selling: Effects of Behavioral Characteristics on Selling Prices
Dependent variable = Selling price of own-car (in 10 thousand yen)
Method of Estimation: OLS, Number of samples = 496
Variable

Characteristics

Q2_7

Urgency

Q2_9

Active Information
Gathering

Q4_2

Active Information
Gathering

Q4_3

Active Information
Gathering

Detailed Description
Purchase Motivation: Car damaged by anaccident
Purchase Motivation: Attractive trade-in
price for old cars
Information-gathering intensity aboutterms and conditions of new cars they buy(5 point scale; 1: very passively -- 5: very
Information-gathering intensity about
price assessment of the own car (5 point
scale; 1: very passively -- 5: very
Kind of information used in buying newcar: Homepage of manufacturers
Kind of information used in selling one's
own car: TVs and radios
Kind of information used in selling one's
own car: Newspapers and journals
Days from starting negotiation to closing
negotiation

Passive Information
Gathering
Passive Information
Q4_6_1Gathering
Active Information
Q4_6_2Gathering
Active Negotiation:
Q5_2
Aggressiveness
Active Negotiation:
Way to sell one's own car: sell it to other dealers
Q8_4
Information-Oriented
Reason to adopt the particular way of
Active Negotiation:
Q9_2
selling one's car: Employees of the
Human Touchcompany are reliable
Active Negotiation: Reason to adopt the particular way of
Q9_4
Information-Oriented selling one's car: Good price is expected
Reason to adopt the particular way of
Q9_6
Passive Negotiation
selling one's car: Do not know other ways
Active Negotiation: How to get high price assessment of one's
Q10_1
Information-Oriented own car: Compare with other dealers'
Number of negotiations for selling one's
Q13_2
Active Negotiation own car: for those who negotiate car
selling terms and conditions
Why not try to access to used-car
purchasing-only companies: Trade-in
Q22_1
Active Negotiation
price becomes higher when it combinedwith new-car price discounts
Why not try to access to used-car
Q22_4
Passive Negotiation purchasing-only companies: Have an
acquaintance in the dealer
Why not try to access to used-car
Q22_7
Passive Negotiation purchasing-only companies: Do not know
its system
INET
Internet EffectInternet usage
Other non-behavioral variables
F2_2_2Age
Age: 10s and 20s
F13_2_2
Car Category
Size Category of purchased car: Medium
F13_2_5
Car Category
Size Category of purchased car: RV
I401_3
Area
Area: Chubu and Hokuriku
YEL_AVE
Market Price
Yellow Book average price
Adjusted R square = 0.564, F = 28.893 (p < 0.001)
Q4_4_11+: P <0.1, *: P <0.05, **: P <0.01
25

Coefficients(beta)

t -valueSignificanceLevel-7.878 -1.994

0.047 *

11.2742.660

0.008 **

-4.179 -3.076

0.002 **

3.103

2.202

0.028 *

-11.430 -2.080

0.038 *

-14.555 -2.225

0.027 *

11.5493.063

0.002 **

-0.203 -2.807

0.005 **

12.2832.096

0.037 *

6.242

2.087

0.037 *

8.638

2.193

0.029 *

-11.014 -2.320

0.021 *

9.886

2.760

0.006 **

3.322

2.925

0.004 **

6.857

2.597

0.010 *

-7.835 -2.018

0.044 *

-10.808 -2.713

0.007 **

3.122

0.002 **

8.213 1.829
5.576 1.890
13.748 3.865
11.082 3.220
0.053 15.512

0.068 +
0.059 +
0.000 **
0.001 **
0.000 **

8.919

Masataka Morita , Kiyohiko G.Nishimura

Table 5: Internet Users and Non-Internet Users
INET
Mean
Standard Deviation
Price Discounts (in 10 thousand yen)
0 = non-user
22.92
15.71
1 = user
21.03
14.74
Total
22.34
15.43
Own-Car Selling Price (in 10 thousand yen)
0 = non-user
31.18
39.22
1 = user
40.99
45.62
Total
35.02
42.07

26

N
358
158
516
302
194
496

Consumer Attitudes and Automotive Transactions

Table 6: Difference between Internet and Non-Internet Users: (1) Price Discounts
Variable

Coefficient(beta)

t-valueSignificance
Level

95% Confidence Interval
Lower

Description

Upper

Baseline = Internet Users [ INET = 1 ]Intercept

29.000

I197_02-10.829 -2.474

3.539

0.000

12.89645.1040.014 -19.430-2.229 Purchase Motivation: Attractive sedan is launched

I198_1

5.887

2.243

0.025

0.729

11.046 Determinants in model choice: Have decided the model well in advance

I198_4-0.500 -0.126

0.900-8.318

I205

0.553

0.487

0.627

-1.679I207_05

3.457

1.271

0.204

-1.888

I209_02

3.175

1.172

0.242

-2.149I209_04-7.192 -2.754

0.006 -12.323

I212_06-7.803 -1.823

0.069 -16.213

I220_08

3.729

1.095

0.274

-2.963I222-3.062 -1.742

0.082-6.515I223-0.373 -0.199

0.843-4.057

R010

0.282

0.297

0.767

-1.5837.318 Determinants in model choice: Style
Information-gathering intensity about cars (5 point scale; 1: very passively
2.785-- 5: very actively)
Kind of information used in determining candidates: Exhibitions and test
8.802
drivesKind of information used in determining a particular model: Newspapers
8.500
and journals
Kind of information used in determining a particular model: D.M.s and-2.060brochures
How to get good terms and conditions: Have the manager participate in
0.608
negotiation
Attitudes to Price Negotiation: Rather, dealers should look for the best car
10.421
together.
Satisfaction level about terms and conditions (4 point scale; 1: very
0.391
unsatisfied -- 4: very satisfied)Interest level about the car in general (4 point scale; 1: totally uninterested
3.312-- 4: very interested)
2.146 Number of negotiations at the dealer store

R011

0.857

0.870

0.385

-1.0772.790 Number of negotiations outside the dealer store

R012

0.073

1.668

0.096

-0.0130.013 -24.089

0.160 Length of one negotiation

I410_2-13.486 -2.499-2.883 Manufacturer: Suzuki

I410_3-6.034 -1.252

0.211 -15.504

3.436 Manufacturer: Daihatsu

I410_9

2.174

0.493

0.622

-6.49010.837 Manufacturer: Honda

YB_SA_AV-0.004 -1.113

0.266-0.0100.003 New Car List Price minus Yellow Book Used-car Price of the model

Difference of Non-Internet Users [ INET = 0 ] from Internet Users [ INET = 1 ][INET=0] *Intercept[INET=0] *I197_02[INET=0] *I198_1[INET=0] *I198_4[INET=0] *I205[INET=0] *I207_05[INET=0] *I209_02[INET=0] *I209_04[INET=0] *I212_06[INET=0] *I220_08[INET=0] *I222[INET=0] *I223[INET=0] *R010[INET=0] *R011[INET=0] *R012[INET=0] *I410_2[INET=0] *I410_3[INET=0] *I410_9[INET=0] *YB_SA_AV-5.722 -0.595

0.552 -24.604

13.161

7.424

0.182

18.332 INET*Purchase Motivation: Attractive sedan is launched

1.337-3.484

INET*Determinants in model choice: Have decided the model well inadvance-4.812 -1.545

0.123 -10.932

1.308

6.209

1.280

0.201

-3.32115.739 INET*Determinants in model choice: Style

0.918

0.684

0.494

-1.720-0.470 -0.143

0.886-6.939-1.000 -0.297

0.767-7.611

3.143

0.325

-3.124

0.985

INET*Information-gathering intensity about cars (5 point scale; 1: very
passively -- 5: very actively)
INET*Kind of information used in determining candidates: Exhibitions and5.999
test drives
INET*Kind of information used in determining a particular model:
5.611
Newspapers and journals
INET*Kind of information used in determining a particular model: D.M.s
9.409
and brochures
INET*How to get good terms and conditions: Have the manager participate
11.436in negotiation
INET*Attitudes to Price Negotiation: Rather, dealers should look for the
8.722
best car together.
INET*Satisfaction level about terms and conditions (4 point scale; 1: very
5.950
unsatisfied -- 4: very satisfied)
INET*Interest level about the car in general (4 point scale; 1: totally
1.337
uninterested -- 4: very interested)
3.557-0.031 -0.005

0.996 -11.498

0.523

0.125

0.900

-7.675

1.708

0.791

0.429

-2.535-3.005 -1.360

0.174-7.347

0.587

0.559

0.576

-1.4742.647 INET*Number of negotiations at the dealer store

0.536

0.477

0.633

-1.6712.743 INET*Number of negotiations outside the dealer store

0.000

0.009

0.993

-0.1030.104 INET*Length of one negotiation

10.327

1.605

0.109

-2.31422.969 INET*Manufacturer: Suzuki-7.764 -1.317

0.189 -19.351

3.823 INET*Manufacturer: Daihatsu-7.994 -1.531

0.126 -18.253

2.264 INET*Manufacturer: Honda

0.006

0.130

0.013 INET*New Car List Price minus Yellow Book Used-car Price of the model

1.517-0.002

Dependent variable = Amount of price discounts+: P <0.1, *: P <0.05, **: P <0.01

27

**
*
*

**
+

+

+
*

Masataka Morita , Kiyohiko G.Nishimura

Table 7: Difference between Internet and Non-Internet Users: (2) Own-Car Selling Prices
Variable

CoefficientSignificancet-value(beta)Level

95% ConfidenceInterval
Lower
Upper

Description

Baseline = Internet Users [ INET = 1 ]+**Intercept

12.064

1.728

0.085

-1.65425.781

Q2_7-11.452-1.9700.049-22.879-0.026 Purchase Motivation: Car damaged by an accident

Q2_9

17.166

2.480

0.013

3.563

30.768 Purchase Motivation: Attractive trade-in price for old cars

Q4_2

-5.201-2.4480.015-9.376-1.026

*

Q4_3

3.573

1.569

0.117

-0.903+

Information-gathering intensity about terms and conditions (5 point scale; 1: very passively -- 5:very actively)
Information-gathering intensity about price assessment of the own car (5 point scale; 1: very
8.050
passively -- 5: very actively)

Q4_4_11-10.915-1.8870.060-22.2800.450 Kind of information used in buying new car: Homepage of manufacturers

Q4_6_1-10.015-0.9810.327-30.074

10.044 Kind of information used in selling one's own car: TVs and radios

Q4_6_215.298

2.579

0.010

3.642

26.954 Kind of information used in selling one's own car: Newspapers and journals

Q5_2-0.298-3.3230.001-0.475-0.122 Days from starting negotiation to closing negotiation

Q8_4

27.306

2.869

0.004

8.604

46.008 Way to sell one's own car: sell it to other dealersQ9_2

10.622

2.044

0.042

0.407

Q9_4

-1.967-0.3070.759-14.568

Q9_6-9.758-1.2760.202-24.781

Q10_1

12.962

2.191

0.029

1.336

24.588 How to get high price assessment of one's own car: Compare with other dealers' offers

Q13_2

3.765

1.804

0.072

-0.337

7.866

Number of negotiations for selling one's own car: for those who negotiate car selling terms andconditions

+

Q22_1

9.668

2.253

0.025

1.235

18.101

Why not try to access to used-car purchasing-only companies: Trade-in price becomes higher whenit combined with new-car price discounts

*

Q22_4

-3.805-0.5200.603-18.191

Q22_7-18.368-3.1120.002-29.968-6.768 Why not try to access to used-car purchasing-only companies: Do not know the system of it

F2_2_2

1.051

0.136

0.892

-14.098

16.200 Age: 10s and 20s

F13_2_2

4.355

0.891

0.373

-5.25313.964 Size Category of purchased car: Medium

F13_2_5

16.694

2.866

0.004

5.245

28.143 Size Category of purchased car: RV

20.837 Reason to adopt the particular way of selling one's car: Employees of the company are reliable10.634 Reason to adopt the particular way of selling one's car: Good price is expected
5.266 Reason to adopt the particular way of selling one's car: Do not know other ways

[INET=0]* Q4_3[INET=0]* Q4 6 1[INET=0]* Q4 6 2[INET=0]* Q5 2[INET=0]* Q8 4[INET=0]* Q9 2[INET=0]* Q9 4[INET=0]* Q9 6[INET=0]* Q10 1

-11.533-1.3750.170-28.019

4.954

9.455

1.182

0.238

-6.26525.175 INET*Purchase Motivation: Car damaged by an accident-8.869-1.0030.317-26.2498.512 INET*Purchase Motivation: Attractive trade-in price for old cars

1.181

0.424

0.672

-4.299

6.662

INET*Information-gathering intensity about terms and conditions (5 point scale; 1: very passively-- 5: very actively)

0.449

0.152

0.879

-5.342

6.240

INET*Information-gathering intensity about price assessment of the own car (5 point scale; 1: very
passively -- 5: very actively)-9.715-0.7230.470-36.127

16.698 INET*Kind of information used in selling one's own car: TVs and radios-6.466-0.8290.408-21.7978.864 INET*Kind of information used in selling one's own car: Newspapers and journals

0.358

2.273

0.024

0.048

-26.062-2.1320.034-50.081-2.044 INET*Way to sell one's own car: sell it to other dealers-5.637-0.8800.379-18.224

6.949

17.467

2.103

0.036

1.145

33.790 INET*Reason to adopt the particular way of selling one's car: Good price is expected-1.009-0.1020.919-20.48118.463 INET*Reason to adopt the particular way of selling one's car: Do not know other ways

0.668 INET*Days from starting negotiation to closing negotiation

**
**
**
**

*
*

INET*Reason to adopt the particular way of selling one's car: Employees of the company are
reliable-6.251-0.8260.409-21.125

8.622 INET*How to get high price assessment of one's own car: Compare with other dealers' offers[INET=0]* Q13_2-1.450-0.5750.566-6.409

3.508

INET*Number of negotiations for selling one's own car: for those who negotiate car selling terms
and conditions[INET=0]* Q22_1-5.146-0.9360.350-15.950

5.658

INET*Why not try to access to used-car purchasing-only companies: Trade-in price becomes higher
when it combined with new-car price discounts-6.498-0.7480.455-23.558

10.562

INET*Why not try to access to used-car purchasing-only companies: Have an acquaintance in the
dealer[INET=0]* Q22_4[INET=0]* Q22 7[INET=0]* F2 2 2[INET=0]* F13 2 2
[INET=0]* F13 2 5
[INET=0]* I401 3[INET=0]*
YEL AV

*

10.581 Why not try to access to used-car purchasing-only companies: Have an acquaintance in the dealer

I401_316.365
2.940
0.003
5.425
27.304 Area: Chubu and Hokuriku
YEL_AV
0.052
9.276
0.000
0.041
0.063 Yellow Book average priceE
Difference of Non-Internet Users [ INET = 0 ] from Internet Users [ INET = 1 ][INET=0]*[INET=0]* Q2 7[INET=0]* Q2 9[INET=0]* Q4 2******15.774

1.940

0.053

-0.20931.756 INET*Why not try to access to used-car purchasing-only companies: Do not know the system of it

8.498

0.883

0.378

-10.41727.412 INET*Age: 10s and 20s
14.529 INET*Size Category of purchased car: Medium

2.336

0.377

0.707

-9.856-5.788-0.771

0.441-20.538

8.961 INET*Size Category of purchased car: RV-8.219-1.1460.252-22.3105.871 INET*Area: Chubu and Hokuriku

0.001

0.133

0.894

-0.0130.015 INET*Yellow Book average price

28

*

+

Consumer Attitudes and Automotive Transactions

Table A.1. List of Variables Considered in the Regression Model of New-Car Price Discounts
variable
I197_01
I197_02
I197_03
I197_04
I197_05
I197_06
I197_07
I197_08
I197_09
I197_10
I198_1
I198_2
I198_3
I198_4
I198_5
I198_6
I198_7
I204
I205
I206
I207_01
I207_02
I207_03
I207_04
I207_05
I207_06
I207_07I207_08I207_10
I209_01
I209_02
I209_03
I209_04
I209_05
I209_07
I209_08
I212_01
I212_02
I212_03
I212_04
I212_05
I212_06
I212_08
I212_09
I212_10
I213
I220_01
I220_02
I220_03
I220_04
I220_05
I220_06
I220_07I220_08I220_09
I220_10
I223
I228
I242
INET
PC
I196_1
I196_2
I196_3
I196_4
I196_5
I196_6
I225_1
I225_2
I225_3
I225_4
R008
R009
R010
R011
R012
Way to sell one's own car:
I239_2
I239_3
I239_5
I410_2
I410_3
I410_4
I410_6
I410_7
I410_8
I410_9I410_10
I224_2
I224_3
YB_AV
YB_SA_AV
Note: See the text.

Description
Purchase Motivation: Replace an old car
Purchase Motivation: Attractive sedan is launched
Purchase Motivation: Attractive RV is launched
Purchase Motivation: Attractive mini car is launched
Purchase Motivation: Attractively priced
Purchase Motivation: Vehicle inspection approaching
Purchase Motivation: Car damaged by an accident
Purchase Motivation: Salesperson's recommendation
Purchase Motivation: Attractive trade-in price for old cars
Purchase Motivation: Bought for the first time
Determinants in model choice: Have decided the model well in advance
Determinants in model choice: Test drive
Determinants in model choice: Price
Determinants in model choice: Style
Determinants in model choice: Easiness to drive
Determinants in model choice: Reliability of (the branch of) the dealer
Determinants in model choice: Reliability of the salesperson
Involvement in negotiation (4 point scale; 1: completely uninvolved -- 4: very involved)
Information-gathering intensity about cars (5 point scale; 1: very passively -- 5: very actively)
Information-gathering intensity about terms and conditions (5 point scale; 1: very passively -- 5: very actively)
Kind of information used in determining candidates: TVs and radios
Kind of information used in determining candidates: Newspapers and journals
Kind of information used in determining candidates: Salespersons
Kind of information used in determining candidates: D.M.s and brochures
Kind of information used in determining candidates: Exhibitions and test drives
Kind of information used in determining candidates: Motor shows
Kind of information used in determining candidates: Friends and relatives
Kind of information used in determining candidates: Seen on the streets
Kind of information used in determining candidates: Homepage of manufacturers
Kind of information used in determining a particular model: TVs and radios
Kind of information used in determining a particular model: Newspapers and journals
Kind of information used in determining a particular model: Salespersons
Kind of information used in determining a particular model: D.M.s and brochures
Kind of information used in determining a particular model: Exhibitions and test drives
Kind of information used in determining a particular model: Friends and relatives
Kind of information used in determining a particular model: Seen on the streets
How to get good terms and conditions: Ask to attach options for free
How to get good terms and conditions: Show competing dealers' priceHow to get good terms and conditions: Get trade-in price information in other dealers
How to get good terms and conditions: Prolong negotiation
How to get good terms and conditions: Rely on friends' recommendation
How to get good terms and conditions: Have the manager participate in negotiation
How to get good terms and conditions: Buy the model just before model-change
How to get good terms and conditions: Compromise with the model suggested by the dealer
How to get good terms and conditions: Do nothing
Is the car you purchased the one you first want to buy? (4 point scale; 1: stick the decided model -- 4: the another model)
Attitudes to Price Negotiation: Prices should be open. (No MSRP).
Attitudes to Price Negotiation: Dealers should post their prices clearly.
Attitudes to Price Negotiation: Prices should be one price.
Attitudes to Price Negotiation: Rather, loan rates should be lowered.
Attitudes to Price Negotiation: Amusing, like a game.
Attitudes to Price Negotiation: Good opportunity to know staffs of the dealer.
Attitudes to Price Negotiation: Rather, after-sales services levels should be clarified.
Attitudes to Price Negotiation: Rather, dealers should look for the best car together.
Attitudes to Price Negotiation: Total waste of time.
Attitudes to Price Negotiation: Rather, dealers should display more models.
Interest level about the car in general (4 point scale; 1: totally uninterested -- 4: very interested)
Sex (1: male, 2: female)
New-car buyer or used-car buyer (1: new-car, 2: used-car)
Internet usage
Whether to use PC
Location of purchase: New dealer
Location of purchase: Same dealer as in the last purchase
Location of purchase: Always from the same dealer
Location of purchase: Used-car dealers
Location of purchase: Garage
Location of purchase: Friends and relatives
Major efforts: Selection of the model
Major efforts: Price negotiation
Major efforts: Trade-in price negotiation
Major efforts: Financing
Days from starting to consider purchase to closing negotiation
Days from starting negotiation to closing negotiation
Number of negotiations at the dealer store
Number of negotiations outside the dealer store
Length of one negotiation
Size Category of purchased car: Large
Size Category of purchased car: Medium
Size Category of purchased car: Small
Size Category of purchased car: RV
Manufacturer: Suzuki
Manufacturer: Daihatsu
Manufacturer: Mazda
Manufacturer: Toyota
Manufacturer: Nissan
Manufacturer: Fuji Juko (Subaru)
Manufacturer: Honda
Manufacturer: Mitsubishi
Purchase Initiative: Recommendation of friends and relatives
Purchase Initiative: Own decision
Next year's Yellow Book used-car average price of the model
New Car List Price minus Yellow Book Used-car Price of the model29

Masataka Morita , Kiyohiko G.Nishimura

T able A.2. List of Variables Considered in the Regression Model of Owned-Car Selling Prices
variable
Q1_2
Q1_3
Q1_4
Q1_5
Q1_67
Q2_1
Q2_2
Q2_3
Q2_4
Q2_5
Q2_6
Q2_7
Q2_8
Q2_9
Q3
Q4_1
Q4_2
Q4_3
Q4_4_1
Q4_4_2
Q4_4_3Q4_4_4Q4_4_5
Q4_4_6
Q4_4_8Q4_4_9Q4_4_11
Q4_6_1
Q4_6_2
Q4_6_3Q4_6_4Q4_6_5
Q5_1
Q5_2
Q6
Q7
Q8_3
Q8_4
Q8_5
Q8_7
Q9_1
Q9_2
Q9_3
Q9_4
Q9_5
Q9_6
Q10_1
Q10_2
Q10_4
Q10_5
Q10_6
Q10_8
Q13_1
Q13_2
Q13_3
Q13_4
Q17
Q18
Q19_1
Q19_2
Q19_3
Q19_4
Q22_1
Q22_2
Q22_3
Q22_4
Q22_5
Q22_6
Q22_7
Q22_8
Q22_9
Q22_12F1
F2_2_2F2_2_4
F2_2_5F2_2_6
F2_2_7
F3_2
F3_4
F3_5
F3_6
F3_7
F3_9
F4
F5
F6
F7_1
F7_2
F7_3
F7_4
F13_2_1
F13_2_2
F13_2_4
F13_2_5
F16
I401_1
I401_3
I401_4
I401_6
I401_7
I402
PC
INET
YEL_AVESYAREI
Note: See the text.

Description
Location of purchase: New dealer
Location of purchase: Same dealer as in the last purchase
Location of purchase: Used-car dealers
Location of purchase: Garage
Location of purchase: Friends and relatives
Purchase Motivation: Replace an old car
Purchase Motivation: Attractive sedan is launched
Purchase Motivation: Attractive RV is launched
Purchase Motivation: Attractive mini car is launched
Purchase Motivation: Attractively priced
Purchase Motivation: Vehicle inspection approaching
Purchase Motivation: Car damaged by an accident
Purchase Motivation: Salesperson's recommendation
Purchase Motivation: Attractive trade-in price for old cars
Involvement in negotiation (4 point scale; 1: completely uninvolved -- 4: very involved)
Information-gathering intensity about cars (5 point scale; 1: very passively -- 5: very actively )Information-gathering intensity about term s and conditions (5 point scale; 1: very passively -- 5: very actively )Information-gathering intensity about price assessment of the own car (5 point scale; 1: very passively -- 5: very actively )Kind of information used in buy ing new car: TVs and radios
Kind of information used in buy ing new car: Newspapers and journals
Kind of information used in buy ing new car: Salespersons
Kind of information used in buy ing new car: D.M.s and brochures
Kind of information used in buy ing new car: Exhibitions and test drives
Kind of information used in buy ing new car: Motor shows
Kind of information used in buy ing new car: Friends and relatives
Kind of information used in buy ing new car: Seen on the streets
Kind of information used in buy ing new car: Homepage of manufacturers
Kind of information used in selling one's own car: TVs and radios
Kind of information used in selling one's own car: Newspapers and journals
Kind of information used in selling one's own car: Employ ees of new-car dealers
Kind of information used in selling one's own car: Employ ees of used-car purchasing-only companies
Kind of information used in selling one's own car: Friends and relatives
Day s from starting to consider purchase to closing negotiation
Day s from starting negotiation to closing negotiation
Whether one bought the previous car with loan finance (1: no previous car, 2: no loan, 3: already paid off, 4: loan remained)
Way to purchase the currently held car (4 point scale; 1: all cash -- 4: all loan)
Way to sell one's own car: sell it to a used-car purchasing-only company
Way to sell one's own car: sell it to other dealers
Way to sell one's own car: sell it to friends or relatives
Way to sell one's own car: others
Reason to adopt the particular way of selling one's car: Convenience
Reason to adopt the particular way of selling one's car: Employ ees of the company are reliable
Reason to adopt the particular way of selling one's car: The company is reliable
Reason to adopt the particular way of selling one's car: Good price is expected
Reason to adopt the particular way of selling one's car: Com bined with new-car price discounts
Reason to adopt the particular way of selling one's car: Do not know other way s
How to get high price assessment of one's own car: Compare with other dealers' offers
How to get high price assessment of one's own car: Compare with other used-car purchasing-only companies' offers
How to get high price assessment of one's own car: Prolong negotiation
How to get high price assessment of one's own car: Rely on friends' recommendation
How to get high price assessment of one's own car: Have the manager participate in negotiation
How to get high price assessment of one's own car: Do nothing
Number of negotiations for selling one's own car: for those who has the negotiation only along with new-car purchasing negotiation
Number of negotiations for selling one's own car: for those who negotiate car selling terms and conditions
Number of negotiations for selling one's own car: for those who use price assessment of other companies that new-car dealers
Number of negotiations for selling one's own car: for those who use price assessment of used-car purchasing-only companies
Purchase Initiative: (5 point scale; 1: salesperson -- 3: friends and relatives -- 5: self)
Interest level about the car in general (4 point scale; 1: totally uninterested -- 4: very interested)
Maj or efforts: Selection of the model
Maj or efforts: Price negotiation
Maj or efforts: Trade-in price negotiation
Maj or efforts: Financing
Why not try to access to used-car purchasing-only companies: Trade-in price becomes higher when it combined with new-car price discounts
Why not try to access to used-car purchasing-only companies: Its offer is not higher than trade-in priceWhy not try to access to used-car purchasing-only companies: The dealer is more reliable
Why not try to access to used-car purchasing-only companies: Have an acquaintance in the dealer
Why not try to access to used-car purchasing-only companies: Inconvenience until delivery of new-car
Why not try to access to used-car purchasing-only companies: Trade-in price is higher
Why not try to access to used-car purchasing-only companies: Do not know the sy stem of it
Why not try to access to used-car purchasing-only companies: Not in near
Why not try to access to used-car purchasing-only companies: Troublesome to accessWhy not try to access to used-car purchasing-only companies: Do not know it
Sex (1: male, 2: female)
Age: 10s and 20s
Age: 40s
Age: 50s
Age: 60s
Age: 70s
Profession: Self-employ ed
Profession: Manager
Profession: Professional
Profession: Clerical
Profession: Manual labor
Profession: Agriculture, etc.
Income of the purchaser (0: 0, 2: less than 2 million y en, 3: less than 3 million y en, 4: less than 4 million y en, 5: less than 5 million y en, 7: less than 7 million y en, 9: less than 9 million y en, 10: more than 9 million y en)
Income of the household (3: less than 3 million y en, 4: less than 4 million y en, 5: less than 5 million y en, 7: less than 7 million y en, 9: less than 9 million y en, 11: less than 11 million y en, 13: more than 11 million y en)
Education (1: elementary and junior high school, 2: senior high school, 3: special school, 4: junior college, 5: college and university )Relation to household head: household head
Relation to household head: spouse
Relation to household head: son
Relation to household head: daughter
Size Category of purchased car: Large
Size Category of purchased car: Medium
Size Category of purchased car: Mini
Size Category of purchased car: RV
Whether one's previously owned car is a used car or not. (1: new-car, 2: used-car)
Area: Hokkaido and Tohoku
Area: Chubu and Hokuriku
Area: Kinki
Area: Chugoku and Shikoku
Area: Ky ushu
Population of a city (1: millions, 2: more than 150 thousands, 3: more than 50 thousands, 4: less than 50 thousands, 5: small towns and villages)
Whether to use PC
Internet usage
Yellow Book average price
Vehicle age

30

Masataka Morita , Kiyohiko G.Nishimura

Bibliographical Notes
Kiyohiko G. Nishimura
Kiyohiko G. Nishimura is Professor of Economics at the University of Tokyo. He received B.A. (1975)
and M.A. (1977) from the University of Tokyo, and Ph. D. (1982) from Yale University.

He was Arthur

M. Okun Research Fellow (1981-1982) at the Brookings Institution in Washington, D.C., before joining
the Faculty of Economics of the University of Tokyo in 1993.
and Professor (1994-) there.

He was Associate Professor (1983-1994)

From 2003, He is also Executive Research Fellow, Economic and Social

Research Institute, Cabinet Office, Government of Japan.

His research area spans widely from economic

theory such as mathematical economics and microeconomic foundation of macroeconomics, tomanagement studies such as real estate and automobile distribution.

He received the Nikkei Prize in1993 for his book, Imperfect Competition, Differential Information, and Microeconomic Foundations ofMacroeconomics (Oxford University Press, 1992) and the Japan Economist Prize in 1997 for his book,
Macroeconomics of “Price Revolution” (Mainichi Shinbun, 1996).

He was also the winner ofJapan-Economic-Association-Nakahara Prize in 1998 for his international contribution to mathematical
economics and economic theory.

He is now a senior advisor of the Asian Economic Panel and a memberof the editorial board of several international academic journals in economics.

He also holds businesspositions: he sits in the Advisory Board of the Fujitsu Research Institute (Japan) and an academic advisorof Recruit & Co. (Japan) and Investment Property Databank (U. K.).

Masataka Morita
Masataka Morita is Assistant Professor of Management Information Systems at the Faculty of Business
Administration, Rissho University.
Waseda University.

He was educated at the School of Political Science and Economics,

After several years of working at Kyushu Matsushita Electric and Fuji Xerox, hereceived his MBA (1998) and Ph. D. (2004) from the Graduate School of Business Administration of Keio
University. He specializes in Management Systems and Managerial Economics.

His master thesis"Customer-to-Customer Interactions on the Networks" won the Telecommunications Advancement
Foundation (Japan) Awards for Social Sciences Students in 1999.

31