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Automobile Prices in Market Equilibrium with Unobserved Price Discrimination

Xavier D’Haultfœuille, Isis Durrmeyer and Philippe Février
Authors registered in the RePEc Author Service: Xavier D'Haultfoeuille

Review of Economic Studies, 2019, vol. 86, issue 5, 1973-1998

Abstract: In markets where sellers are able to price discriminate, individuals pay different prices that may be unobserved by the econometrician. This article considers the structural estimation of a demand and supply model of differentiated products with such price discrimination and limited information on prices taking the form of, e.g., observing list prices from catalogues or average prices. Within this framework, identification is achieved not only with usual moment conditions on the demand side, but also through supply-side restrictions. The model can be estimated by GMM using a nested fixed point algorithm that extends the usual contraction mapping algorithm to our setting. We apply our methodology to estimate the demand and supply in the French new automobile market. Our results suggest that discounting arising from price discrimination is important. The average discount is estimated to be 9.6%, with large variation depending on buyers’ characteristics and cars’ specifications. Our results are consistent with other evidence on transaction prices in France.

Keywords: Demand and supply; Unobserved prices; Price discrimination; Automobiles (search for similar items in EconPapers)
JEL-codes: C51 D12 D22 (search for similar items in EconPapers)
Date: 2019
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Related works:
Working Paper: Automobile Prices in Market Equilibrium with Unobserved Price Discrimination (2017) Downloads
Working Paper: Automobile Prices in Market Equilibrium with Unobserved Price Discrimination (2017) Downloads
Working Paper: Automobile Prices in Market Equilibrium with Unobserved Price Discrimination (2014) Downloads
Working Paper: Automobile Prices in Market Equilibrium with Unobserved Price Discrimination (2014) Downloads
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