Information Processing

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Archive for the ‘sales’ Category

Confessions of a car dealer

with 3 comments

Ever wonder what’s behind the horrible experience of buying a car at a dealership? What the negotiation looks like from the other side?

There’s a great podcast up on Econtalk, in which Russ Roberts (econ prof at George Mason) interviews a sales manager at a Honda dealership. Did you know that everyone working on the sales side, including the manager, is on 100% commission-based compensation? The average amount earned by the salesman on the sale of a new car is about $350. Check out the comments as well.

The sales manager adopts a stubbornly behavioral position for why prices of cars are not set in a more transparent manner — that we are culturally conditioned to haggle over car prices. In the comments several more traditional economic (game or information theoretic) arguments are proposed. How does it work in other countries? Are Japanese car salesmen just like their American counterparts?

Written by infoproc

June 10, 2008 at 6:54 pm