The Competitive Implications of A "No-Haggle" Pricing Policy: The Case of the Access Toyota Program
Speaker
Abstract
| Although prices in the automobile market are traditionally determined through bargaining, some manufacturers now sell their vehicles at a "no-haggle" or fixed price. We explore empirically the implications of using this policy by examining the impact of the fixed price policy, or "Access" program implemented by the Toyota Company in Canada on the prices and sales of both Toyota and its closest competitor Honda, which did not adopt the policy. Toyota implemented the fixed price policy in all provinces in Canada except the province of Ontario for regulatory reasons, which creates a natural experiment for us to explore the policy effect. We found that, while prices of both Toyota and Honda were higher in provinces with the program, there was an increase in Honda’s sales but no effect on the sales of Toyota. While the policy has been beneficial for both firms, the impact on consumer welfare depends upon how much consumers value being able to buy a car without haggling over price. |
| Contact information: |
| Dr. S. Puntoni |
