The Effects of Price Dispersion on Sales in the Automobile Industry: A Dynamic Panel Analysis

Ya-Ling Chiu, Jiangze Du and Jying-Nan Wang

SAGE Open, 2022, vol. 12, issue 3, 21582440221120647

Abstract: Price dispersion is an important indicator of pricing strategy and market efficiency. However, the relationship between price dispersion and sales has not been explored, especially for durable goods such as automobiles. In this study, we use a unique data set from Autohome comprising the actual transaction prices of buyers to assess the extent of price dispersion in the new automobile market. Based on an empirical analysis of over 222,592 price observations for 59 vehicle models collected over a period of 48 months, we find that the percentage difference ( PD ) and coefficient of variation ( CV ) of new automobile transaction prices are 43.4% and 9.9%, respectively. In addition, the empirical results show that the price dispersions lower for non-sedan type, Chinese car brands, and produced by state-owned companies. We further investigate whether the increase in the price dispersion of a new automobile has a positive impact on automobile sales using a multiple quadratic regression model. The findings show that price dispersion has positively impact of sales. More interestingly, negative quadratic effects are observed, indicating a concave-down-increasing relationship between price dispersion and sales. This implies that an extreme price dispersion is less helpful than a moderate price dispersion. These findings advance knowledge of consumer buying behavior and seller pricing strategies, with important theoretical contributions and practical implications for automobile companies.

Keywords: pricing strategy; transaction prices; price dispersion; sales (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://journals.sagepub.com/doi/10.1177/21582440221120647 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sae:sagope:v:12:y:2022:i:3:p:21582440221120647

DOI: 10.1177/21582440221120647

Access Statistics for this article

More articles in SAGE Open
Bibliographic data for series maintained by SAGE Publications ().