Estimating expectations-based reference-price effects in the used-car retail market
Tóm tắt
This paper estimates the reference-price effects in consumers’ car purchase decisions exploiting a unique panel data-set on the non-negotiable daily list prices for used cars advertised by a large national dealership. Guided by the theory of Köszegi and Rabin (The Quarterly Journal of Economics, 1133–1165, 2006), the paper identifies the reference price for a car as the car’s list price on the previous day, a point with a large probability mass in car buyers’ price expectations. The paper finds that — controlling for a car’s actual price, its detailed attributes, the competitive environment, and a rich set of fixed effects — a positive (negative) deviation of the car’s actual price from the previous day’s list price lowers (increases) its daily sale probability significantly more than what can be accounted for by the standard effect of the car’s resulting actual price. The magnitudes of the estimated reference-price effects are comparable to that of the standard price effect and are significantly stronger for cars with more exposures to prior consumer search. Implications for the dynamic pricing strategy for car dealers (and retailers in general) and inflation dynamics are discussed.
Tài liệu tham khảo
Abeler, J., Falk, A., Goette, L., & Huffman, D. (2011). Reference points and effort provision. The American Economic Review, 101(2), 470–492.
Aguirregabiria, V. (1999). The dynamics of markups and inventories in retailing firms. Review of Economic Studies, 66, 275–308.
Allen, E.J., Dechow, P.M., Pope, D.G., & Wu, G. (2016). Reference-dependent preferences: Evidence from marathon runners. Management Science.
Angrist, J.D., & Pischke, J.-S. (2009). Mostly harmless econometrics: An empiricist’s companion.
Bell, D.E. (1985). Disappointment in decision making under uncertainty. Operations Research, 33(1), 1–27.
Busse, M., Silva-Risso, J., & Zettelmeyer, F. (2006). $1,000 cash back: The pass-through of auto manufacturer promotions. American Economic Review, 96(4), 1253–1270.
Busse, M.R., Simester, D.I., & Zettelmeyer, F. (2010). The best price you’ll ever get: the 2005 employee discount pricing promotions in the us automobile industry. Marketing Science, 29(2), 268–290.
Copeland, A. (2014). Intertemporal substitution and new car purchases. The RAND Journal of Economics, 45(3), 624–644.
Crawford, V.P., & Meng, J. (2011). New york city cab drivers’ labor supply revisited: Reference-dependent preferences with rationalexpectations targets for hours and income. The American Economic Review, 101(5), 1912–1932.
Erdem, T., Mayhew, G., & Sun, B. (2001). Understanding reference-price shoppers: a within-and cross-category analysis. Journal of Marketing Research, 38(4), 445–457.
Ericson, K.M.M., & Fuster, A. (2011). Expectations as endowments: Evidence on reference-dependent preferences from exchange and valuation experiments. The Quarterly Journal of Economics, qjr034.
Farber, H.S. (2015). Why you can’t find a taxi in the rain and other labor supply lessons from cab drivers. The Quarterly Journal of Economics, 130(4), 1975–2026.
Genesove, D., & Mayer, C. (2001). Loss aversion and seller behavior: Evidence from the housing market*. The Quarterly journal of economics, 116(4), 1233–1260.
Gill, D., & Prowse, V. (2012). A structural analysis of disappointment aversion in a real effort competition. American Economic Review, 102(1), 469–503.
Gul, F. (1991). A theory of disappointment aversion. Econometrica: Journal of the Econometric Society, 667–686.
Hardie, B.G., Johnson, E.J., & Fader, P.S. (1993). Modeling loss aversion and reference dependence effects on brand choice. Marketing Science, 12(4), 378–394.
Heffetz, O., & List, J.A. (2014). Is the endowment effect an expectations effect? Journal of the European Economic Association, 12(5), 1396–1422.
Hendel, I., & Nevo, A. (2006). Sales and consumer inventory. Forthcoming. RAND Journal of Economics.
Huang, G., Luo, H., & Xia, J. (2015). Invest in information or wing it? a model of dynamic pricing with seller learning. Working Paper.
Huang, G., Luo, H., & Xia, J. (2019). Invest in information or wing it? a model of dynamic pricing with seller learning. Management Science, 65 (12), 5556–5583.
Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under risk. Econometrica: Journal of the econometric society, 263–291.
Kalwani, M.U., Yim, C.K., Rinne, H.J., & Sugita, Y. (1990). A price expectations model of customer brand choice. Journal of Marketing research, 251–262.
Köszegi, B., & Rabin, M. (2006). A model of reference-dependent preferences. The Quarterly Journal of Economics, 1133–1165.
Liang, K.-Y., & Zeger, S.L. (1986). Longitudinal data analysis using generalized linear models. Biometrika, 73(1), 13–22.
Loomes, G., & Sugden, R. (1986). Disappointment and dynamic consistency in choice under uncertainty. The Review of Economic Studies, 53(2), 271–282.
Mason, R., & Välimäki, J. (2011). Learning about the arrival of sales. Journal of Economic Theory.
Mazumdar, T., Raj, S.P., & Sinha, I. (2005). Reference price research: Review and propositions. Journal of Marketing, 69(4), 84–102.
Putler, D.S. (1992). Incorporating reference price effects into a theory of consumer choice. Marketing Science, 11(3), 287–309.
Ray, D., Camerer, C.F., & Shum, M. (2015). Loss aversion in post-sale purchases of consumer products and their substitutes. American Economic Review, 105(5), 376–380.
Shalev, J. (2000). Loss aversion equilibrium. International Journal of Game Theory, 29(2), 269–287.
Stock, J.H., & Wright, J.H. (2000). Gmm with weak identification. Econometrica, 68(5), 1055–1096.
Tversky, A., & Kahneman, D. (1992). Advances in prospect theory: Cumulative representation of uncertainty. Journal of Risk and uncertainty, 5(4), 297–323.
Wooldridge, J.M. (2010). Econometric analysis of cross section and panel data. MIT press.