The Effectiveness of Field Price Discretion: Empirical Evidence from Auto Lending

• 成果类型: Article
• 署名作者: Phillips, Robert; Simsek, A. Serdar; van Ryzin, Garrett
• 署名单位: Columbia University; Cornell University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2014.2084
• 发表日期: 2015
• 页码: 1741-1759
• 关键词: customized pricing; sales force price discretion; price sensitivity estimation; endogeneity; Consumer lending

摘要

In many markets, it is common for headquarters to create a price list but grant local salespeople discretion to negotiate prices for individual transactions. How much (if any) pricing discretion headquarters should grant is a topic of debate within many firms. We investigate this issue using a unique data set from an indirect lender with local pricing discretion. We estimate that the local sales force adjusted prices in a way that improved profits by approximately 11% on average. A counterfactual analysis shows that using a centralized, data-driven pricing optimization system could improve profits even further, up to 20% over those actually realized. This suggests that centralized pricing-if appropriately optimized-can be more effective than field price discretion. We discuss the implications of these findings for auto lending and other industries with similar pricing processes.