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Auto Dealer Loan Intermediation: Consumer Behavior and Competitive Effects / Andreas Grunewald, Jonathan A. Lanning, David C. Low, Tobias Salz.
- Format:
- Book
- Author/Creator:
- Grunewald, Andreas.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w28136.
- NBER working paper series no. w28136
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2020.
- Summary:
- This paper studies the intermediation of auto loans through auto dealers using new and comprehensive administrative data. The arrangements between auto dealers and lenders incentivize dealers to increase loan prices. We leverage details of the corresponding contracts to demonstrate that many consumers are less responsive to finance charges than to vehicle charges. Taking this behavior into account, we estimate an equilibrium model of dealer price setting and lender competition. We explore counterfactuals where dealers have no discretion to price loans and final rates are set by lenders instead. We find large gains in consumer surplus from such a policy.
- Notes:
- Print version record
- November 2020.
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