$1,000 cash back: The pass-through of auto manufacturer promotions

Meghan Busse*, Jorge Silva-Risso, Florian Zettelmeyer

*Corresponding author for this work

Research output: Contribution to journalArticle

105 Scopus citations

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.

Original languageEnglish (US)
Pages (from-to)1253-1270
Number of pages18
JournalAmerican Economic Review
Volume96
Issue number4
DOIs
StatePublished - Sep 1 2006

ASJC Scopus subject areas

  • Economics and Econometrics

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