Simple economic theory predicts that a new car, a transferable commodity good sold by multiple dealers, should not be subject to price discrimination. But haggling (negotiation), a form of price discrimination, is very common. What is going on?
A Bertrand duopoly predicts that the advertised price should yield zero economic profit.
Random thoughts: somehow the fixed cost of running a dealership needs to get divided among the profit among the many cars sold. How should the division be made? A unsold new car depreciates as the next year's model approaches. The dealer faces a risk that the car might not be sold at all.
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