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Price Variations Among Automobile Dealers in Metropolitan Chicago

1960; University of Chicago Press; Volume: 33; Issue: 1 Linguagem: Inglês

10.1086/294307

1537-5374

Allen F. Jung,

Urban and Freight Transport Logistics

T H ROUGH the years many beliefs about car shopping have come to be widely held by consumers, economists, and people in the industry. Among the more commonly held beliefs are those that state that car prices are much lower near the end of a model year than at any other time; that shopping must be done in person rather than by telephone to obtain a good price; and that city automobile dealers sell at substantially lower prices than those outside the city. Careful investigation reveals that all three of these beliefs are seriously in error. The present study of Chicago automobile dealers was designed to determine what changes these dealers brought about in their pricing policies toward the end of the model year. The telephone was utilized to see how it would compare as a shopping medium with personal shopping interviews. Dealers outside Chicago were also contacted to ascertain whether their prices were competitive with Chicago dealers. The selling effort of the sales force was measured in terms of whether dealer salesmen exerted more or less effort later in the model year and whether dealers outside Chicago exerted more or less sales effort than did those in Chicago. The study of all Ford and Chevrolet dealers in Chicago and all the Ford dealers in the surrounding seven-county area was conducted during a nine-day period in August, 1959. It was found that Ford and Chevrolet dealers quoted approximately the same prices in August as they did in February.' Prices received on the telephone compared very closely with prices obtained by shopping in person. All dealers but one quoted prices over the telephone, and only one additional dealer quoted an unrealistic price. As a group, Ford dealers in the sevencounty metropolitan area (excluding Chicago) quoted prices about 1.4 per cent higher than Chicago Ford dealers, but this masks significant variations within the area. Dealers located within ten miles of Chicago quoted prices slightly lower than Chicago dealers, while dealers located at a greater distance from Chicago quoted higher prices. The level of selling effort on the part of Chicago automobile salesmen was just about as low in August as it was in February.2 Salesmen representing dealers outside Chicago exercised a little more salesmanship than those representing Chicago dealers.