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NEW PHOENIX CENTER STUDY DEMONSTRATES THAT CONSUMERS BENEFIT FROM
INTRA-BRAND PRICE COMPETITION AMONG AUTO DEALERS
Changing State Franchise Laws Could Reduce Number of Dealers Which Could, In Turn, Soften
Competition and Raise New Car Prices for Consumers
WASHINGTON, D.C. – In a new analysis released today entitled
The Price Effects of Intra-Brand
Competition in the Automobile Industry:
An Econometric Analysis,
the Phoenix Center addresses the
important question of whether automobile dealers for the same make and model of new cars and
trucks compete on price.
The study finds that consumers significantly benefit from “intra-brand”
price competition for new cars—often in the hundreds of dollars per sale.
Cars are expensive and most consumers know to shop among dealers for the best prices.
until this study there has been little to no empirical evidence on the price effects of intra-brand
competition among different dealer franchises for the same automobile model.
samples of transactions for ten of the most popular new cars purchased in the state of Texas for the
years 2011, 2012, and 2013, the Phoenix Center study estimates the effects of intra-brand
competition on new car prices.
Intra-brand competition is measured as the distance (in miles) to the nearest same-brand
Significantly, for all but one of the models, the Phoenix Center’s scholars find that intra-
brand competition does, in fact, lower new car prices for consumers.
For the popular Honda
Accord, for example, increasing the distance between Honda dealerships by thirty miles raises the
price paid by consumers by about $500.
”When two same-brand dealers compete for the business of a consumer on a car, the
bargaining focuses mostly on price,” said study co-author Dr. George S. Ford, Chief Economist of
the Phoenix Center.
“The data show that having multiple same-brand dealers in close proximity
produces significant price cuts for the consumer.
More auto dealers means lower consumer
Given that retail margins on auto sales are quite small (about 6% on average), the price
reductions resulting from intra-brand competition are substantial relative savings for new-car
Moreover, the Phoenix Center finds that the price effects of intra-brand competition
are relatively strong compared to inter-brand competition—at the sample means, moving an intra-
brand dealer one mile closer reduces prices by the equivalent of an increase in 35 inter-brand
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Contact: Lawrence J. Spiwak
Phone: +1 (202) 274-0235
FOR IMMEDIATE RELEASE
Wednesday, March 11, 2015