This paper addresses the question of how much the Internet lowers prices for new cars and why. Using a large dataset of transaction prices for new automobiles and referral data from Autobytel.com, we find that online consumers pay on average 1.2% less than do offline consumers. After controlling...

There is convincing evidence that the Internet has lowered the prices paid by some consumers inestablished industries, for example, term life insurance and car retailing. However, current researchdoes not reveal much about how using the Internet lowers prices. This paper answers this questionfor...