What affects customer success when bargaining for a new car? Some empirical evidence

Data about 233 new car models were collected, and a measure of customer success in bargaining for a new car (alpha) was created by computing the ratio between the discount received on the manufacturer's suggested retail price (MSRP) and the negotiable range (MSRP − dealer's car cost). One hypothesis was that customers who purchase more expensive cars succeed less in bargaining because of their higher time value. A second hypothesis was that a positive correlation between the negotiable range and alpha should exist, because of either customer incentives to bargain or dealer's bargaining strategy. Both hypotheses were supported by the data.

► Analysis of data about purchases of 233 new car models. ► Customers who purchase more expensive cars succeed less in bargaining because of their higher time value. ► A positive correlation between the negotiable range (MSRP − dealer's car cost) and the customer's success in the bargaining. ► The latter can result either from the customer's incentives to bargain or from the dealer's bargaining strategy.