Dealer Pricing of Consumer Credit

Giuseppe Bertola, Stefan Hochguertel () and Winfried Koeniger ()

No 24, Royal Economic Society Annual Conference 2002 from Royal Economic Society

Abstract: Interest rates on consumer lending are lower when funds are tied to purchase of a durable good than when they are made available on an unconditional basis. Further, dealers often choose to bear the financial cost of their customers' credit purchases. This paper interprets this phenomenon in terms of monopolistic price discrimination. We characterize consumers' intertemporal consumption decisions and the dealer's pricing incentives when the consumers' unconditional lending and borrowing rate as well as the internal rate of return of the durable purchase differ. Our empirical analysis offers considerable support for the assumptions and implications of our theoretical perspective.

Date: 2002-08-29

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Related works:
Working Paper: Dealer Pricing of Consumer Credit (2002)
Working Paper: Dealer Pricing of Consumer Credit (2002)
Journal Article: DEALER PRICING OF CONSUMER CREDIT * (2005)
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Persistent link: http://EconPapers.repec.org/RePEc:ecj:ac2002:24

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