Prices, Production and Inventories over the Automotive Model Year

Preprint OPEN
Adam Copeland; Wendy Dunn; George Hall;
(2005)
  • Subject: Automobile industry and trade - Finance ; Automobiles - Prices | dynamic pricing, discrete choice demand estimation, dynamic programming, revenue management
    • jel: jel:D21 | jel:D42 | jel:L62 | jel:E22 | jel:L11

This paper studies the within-model-year pricing and production of new automobiles. Using new monthly data on U.S. transaction prices, we document that for the typical new vehicle, prices typically fall over the model year at a 9.2 percent annual rate. Concurrently, bot... View more
  • References (9)

    9 9 9 1 5For example, Bresnahan and Reiss (1985) model and estimate the division of markups between automobile manufacturers and dealers. For discussions of bargaining and price discrimination in the retail auto market see Ayres and Siegelman (1995), Goldberg (1996), and Zettelmeyer, Scott Morton, and Silva-Risso (2001). Data τ = 1 τ = 0 Market Price Vintage Price Vintage Price Segment Decline Premium Decline Premium Decline Compact 9.5 (2.4) 7.1 (0.5) 10.0 9.3 4.6 Midsize 9.2 (1.5) 8.5 (0.4) 8.4 8.1 3.1 Fullsize 8.9 (2.1) 8.3 (0.6) 7.1 6.4 2.2 Luxury 11.6 (1.2) 11.6 (0.4) 10.1 10.7 5.1 Pickup 9.9 (2.2) 10.6 (0.7) 9.5 9.1 5.3 SUV 8.2 (0.9) 7.2 (0.4) 7.4 6.9 3.4 Sporty 5.1 (2.4) 7.2 (0.8) 4.3 4.1 1.7 Van 9.6 (1.4) 8.6 (0.4) 8.3 8.7 4.3 Average 9.2 (0.6) 8.8 (0.2) 8.1 7.9 3.7 Note: The percentage price declines are at annual rates. Standard errors are in parentheses.

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