Automobile Prices in Market Equilibrium with Unobserved Price Discrimination

Xavier D'Haultfoeuille, Isis Durrmeyer and Philippe Février

No 17-854, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: In markets where sellers are able to price discriminate, individuals pay different prices that may be unobserved by the econometrician. This paper considers the structural estimation of a demand and supply model à la Berry et al. (1995) 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 by using supply-side conditions, provided that the marginal costs of producing and selling the goods do not depend on the characteristics of the buyers. The model can be estimated by GMM using a nested fixed point algorithm that extends BLP’s 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 transaction prices; price discrimination; automobiles (search for similar items in EconPapers)
JEL-codes: C51 D12 (search for similar items in EconPapers)
Date: 2017-10
New Economics Papers: this item is included in nep-com and nep-tre
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Automobile Prices in Market Equilibrium with Unobserved Price Discrimination (2019)
Working Paper: Automobile Prices in Market Equilibrium with Unobserved Price Discrimination (2017)
Working Paper: Automobile Prices in Market Equilibrium with Unobserved Price Discrimination (2014)
Working Paper: Automobile Prices in Market Equilibrium with Unobserved Price Discrimination (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:32136

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