IDEAS home Printed from https://ideas.repec.org/a/aea/aecrev/v96y2006i4p1253-1270.html
   My bibliography  Save this article

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

Author

Listed:
  • Meghan Busse
  • Jorge Silva-Risso
  • Florian Zettelmeyer

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. (JEL D82, L11, L15, L62, L81, M31)

Suggested Citation

  • Meghan Busse & Jorge Silva-Risso & Florian Zettelmeyer, 2006. "$1,000 Cash Back: The Pass-Through of Auto Manufacturer Promotions," American Economic Review, American Economic Association, vol. 96(4), pages 1253-1270, September.
    • Handle: RePEc:aea:aecrev:v:96:y:2006:i:4:p:1253-1270
    Note: DOI: 10.1257/aer.96.4.1253
    as

    Download full text from publisher

    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.96.4.1253
    Download Restriction: no
    File URL: http://www.aeaweb.org/aer/data/sept06/20041005_data.zip
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.
    ---><---

    References listed on IDEAS

    as
    1. David Besanko & Jean-Pierre Dubé & Sachin Gupta, 2005. "Own-Brand and Cross-Brand Retail Pass-Through," Marketing Science, INFORMS, vol. 24(1), pages 123-137, July.
    2. Sandra E. Black, 1999. "Do Better Schools Matter? Parental Valuation of Elementary Education," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(2), pages 577-599.
    3. Imbens, Guido W & Angrist, Joshua D, 1994. "Identification and Estimation of Local Average Treatment Effects," Econometrica, Econometric Society, vol. 62(2), pages 467-475, March.
    4. Gul, Faruk & Sonnenschein, Hugo & Wilson, Robert, 1986. "Foundations of dynamic monopoly and the coase conjecture," Journal of Economic Theory, Elsevier, vol. 39(1), pages 155-190, June.
    5. Aviv Nevo & Catherine Wolfram, 2002. "Why Do Manufacturers Issue Coupons? An Empirical Analysis of Breakfast Cereals," RAND Journal of Economics, The RAND Corporation, vol. 33(2), pages 319-339, Summer.
    6. Sobel, Joel, 1991. "Durable Goods Monopoly with Entry of New Consumers," Econometrica, Econometric Society, vol. 59(5), pages 1455-1485, September.
    7. Drew Fudenberg & David K. Levine & Jean Tirole, 1985. "Infinite-Horizon Models of Bargaining with One-Sided Incomplete Information," Levine's Working Paper Archive 1098, David K. Levine.
    8. Hahn, Jinyong & Todd, Petra & Van der Klaauw, Wilbert, 2001. "Identification and Estimation of Treatment Effects with a Regression-Discontinuity Design," Econometrica, Econometric Society, vol. 69(1), pages 201-209, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Frölich, Markus & Lechner, Michael, 2010. "Exploiting Regional Treatment Intensity for the Evaluation of Labor Market Policies," Journal of the American Statistical Association, American Statistical Association, vol. 105(491), pages 1014-1029.
    2. James J. Anton & Gary Biglaiser, 2010. "Quality, Upgrades, and Equilibrium in a Dynamic Monopoly Model," Working Papers 10-36, Duke University, Department of Economics.
    3. James J. Anton & Gary Biglaiser, 2007. "Quality Upgrades and the (loss) of Market Power in a Dynamic Monopoly Model," Working Papers 18, Portuguese Competition Authority.
    4. Frandsen, Brigham R. & Frölich, Markus & Melly, Blaise, 2012. "Quantile treatment effects in the regression discontinuity design," Journal of Econometrics, Elsevier, vol. 168(2), pages 382-395.
    5. Frölich, Markus, 2007. "Regression Discontinuity Design with Covariates," IZA Discussion Papers 3024, Institute of Labor Economics (IZA).
    6. Markus Frölich, 2004. "Programme Evaluation with Multiple Treatments," Journal of Economic Surveys, Wiley Blackwell, vol. 18(2), pages 181-224, April.
    7. Guido W. Imbens & Jeffrey M. Wooldridge, 2009. "Recent Developments in the Econometrics of Program Evaluation," Journal of Economic Literature, American Economic Association, vol. 47(1), pages 5-86, March.
    8. Bauer, Thomas K. & Bender, Stefan & Paloyo, Alfredo R. & Schmidt, Christoph M., 2012. "Evaluating the labor-market effects of compulsory military service," European Economic Review, Elsevier, vol. 56(4), pages 814-829.
    9. John DiNardo & David S. Lee, 2010. "Program Evaluation and Research Designs," Working Papers 1228, Princeton University, Department of Economics, Industrial Relations Section..
    10. DiNardo, John & Lee, David S., 2011. "Program Evaluation and Research Designs," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 5, pages 463-536, Elsevier.
    11. Imbens, Guido W. & Lemieux, Thomas, 2008. "Regression discontinuity designs: A guide to practice," Journal of Econometrics, Elsevier, vol. 142(2), pages 615-635, February.
    12. Anton, James J. & Biglaiser, Gary, 2013. "Quality, upgrades and equilibrium in a dynamic monopoly market," Journal of Economic Theory, Elsevier, vol. 148(3), pages 1179-1212.
    13. Buehler, Stefan & Eschenbaum, Nicolas, 2021. "Dynamic Monopoly Pricing With Multiple Varieties: Trading Up," Economics Working Paper Series 2113, University of St. Gallen, School of Economics and Political Science.
    14. Blaise Melly & Rafael Lalive, 2020. "Estimation, Inference, and Interpretation in the Regression Discontinuity Design," Diskussionsschriften dp2016, Universitaet Bern, Departement Volkswirtschaft.
    15. Susan Athey & Guido W. Imbens, 2017. "The State of Applied Econometrics: Causality and Policy Evaluation," Journal of Economic Perspectives, American Economic Association, vol. 31(2), pages 3-32, Spring.
    16. Arieh Gavious & Ella Segev, 2017. "Price Discrimination Based on Buyers’ Purchase History," Dynamic Games and Applications, Springer, vol. 7(2), pages 229-265, June.
    17. Calvano, Emilio, 2006. "Destructive Creation," SSE/EFI Working Paper Series in Economics and Finance 653, Stockholm School of Economics, revised 30 Dec 2007.
    18. Leonardo Rezende & In-Koo Cho, 2007. "Perishable Durable Goods," 2007 Meeting Papers 453, Society for Economic Dynamics.
    19. Brzustowski, Thomas & Georgiadis Harris, Alkis & Szentes, Balázs, 2023. "Smart contracts and the Coase conjecture," LSE Research Online Documents on Economics 117950, London School of Economics and Political Science, LSE Library.
    20. Christian Durán, 2004. "Evaluación microeconométrica de las políticas públicas de empleo: aspectos metodológicos," Hacienda Pública Española / Review of Public Economics, IEF, vol. 170(3), pages 107-133, september.

    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

    Lists

    This item is featured on the following reading lists, Wikipedia, or ReplicationWiki pages:
    1. $1,000 Cash Back: The Pass-Through of Auto Manufacturer Promotions (AER 2006) in ReplicationWiki

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aecrev:v:96:y:2006:i:4:p:1253-1270. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.