American Economic Review Vol. 96 No. 4 2006

$1,000 Cash Back: The Pass-Through of Auto Manufacturer Promotions

Meghan R. Busse¹; Jorge Silva-Risso²; Florian Zettelmeyer³

¹ Haas School of Business, University of California Berkeley , Berkeley, CA 94720, · ² The A. G. Anderson Graduate School of Management, University of California, Riverside, Riverside, CA 92521. · ³ Haas School of Business, University of California, Berkeley, Berkeley, CA 94720, and National Bureau of Economic Research.

Abstract

Automobile manufacturers frequently use promotions involving cash incentives. While payments are nominally directed to either customers or dealers, the ultimate beneficiary of the promotion depends on the outcome of price negotiation. We use program evaluation methods to compare the incidence of these two types of promotions. Customers obtain 70 to 90 percent of a customer rebate, but only 30 to 40 percent of a dealer discount promotion, a $500 difference for a typical promotion. Our leading hypothesis is that pass-through rates differ because of information asymmetries: customer rebates are well-publicized to customers, while dealer discount promotions are not.

DOI

10.1257/aer.96.4.1253

Volume

96

Issue

4

Pages

1253-1270

Language

en

Sources

openalex crossref bibtex:phds-export.bib

Cite

APA 7 MLA 9 Chicago (author–date) Harvard Elsevier Harvard (JFE, JBF…) The Accounting Review Academy of Management American Marketing Association INFORMS (Management Science) Copy citation Copied ✓