Internet Car Retailing
34 Pages Posted: 13 Oct 2000 Last revised: 13 Feb 2023
There are 2 versions of this paper
Date Written: October 2000
Abstract
This paper investigates the effect of Internet car referral services on dealer pricing of automobiles in California. Combining data from J.D. Power and Associates and Autobytel.com, a major online auto referral service, we compare online transaction prices to regular street' prices. We find that the average customer of this online service pays approximately 2% less for her car, which corresponds to about $450 for the average car. Fifteen percent of the savings comes from making the purchase at a low-price dealership affiliated with the web service. The remaining 85% of the savings seem to be due to the bargaining power of the referral service and the lower cost of serving an online consumer. Dealer price dispersion declines with online sales, indicating we are picking up more than a selection effect. Online consumers who indicate they are ready to buy in the next two days pay even lower prices. Dealers pay less for an online customer's trade-in vehicle, although on-line customers are still better off overall than offline customers. Dealer average gross margin on an online vehicle sale is lower by about $300 than an equivalent offline sale. However, because online consumers are cheaper to serve and online sales may be new business for the dealerships, web-affiliated dealers are likely to be better off. Consumers who use the web do better than at least 61% of offline consumers.
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Position Auctions with Consumer Search
By Susan Athey and Glenn Ellison
-
Paid Placement: Advertising and Search on the Internet
By Yongmin Chen and Chuan He
-
An Empirical Analysis of Search Engine Advertising: Sponsored Search in Electronic Markets
By Anindya Ghose and Sha Yang
-
By Sha Yang and Anindya Ghose
-
From Generic to Branded: A Model of Spillover Dynamics in Paid Search Advertising
-
By Juan Feng, Hemant K. Bhargava, ...
-
Search Engine Advertising: Channel Substitution when Pricing Ads to Context
By Avi Goldfarb and Catherine E. Tucker
-
A Dynamic Model of Sponsored Search Advertising
By Song Yao and Carl F. Mela