UID:
almafu_9958056492902883
Format:
1 online resource:
,
illustrations (black and white);
Series Statement:
NBER working paper series no. w11515
Content:
There is convincing evidence that the Internet has lowered the prices paid by some consumers in
Content:
established industries, for example, term life insurance and car retailing. However, current research
Content:
does not reveal much about how using the Internet lowers prices. This paper answers this question
Content:
for the auto retailing industry. We use direct measures of search behavior and consumer
Content:
characteristics to investigate how the Internet affects negotiated prices. We show that the Internet
Content:
lowers prices for two distinct reasons. First, the Internet helps consumers learn the invoice price of
Content:
dealers. Second, the referral process of online buying services, a novel institution made possible by
Content:
the Internet, also helps consumers obtain lower prices. The combined information and referral price
Content:
effects are -1.5%, corresponding to 22% of dealers' average gross profit margin per vehicle. We also
Content:
find that buyers with a high disutility of bargaining benefit from information on the specific car they
Content:
eventually purchased while buyers who like the bargaining process do not. The results suggest that
Content:
the decisions consumers make to use the Internet to gather information and to use the negotiating
Content:
clout of an online buying service have a real effect on the prices paid by these consumers.
Note:
August 2005.
Language:
English
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