Price Discrimination and Online Sales in the Automobile Industry

We investigate the welfare consequences of the introduction of the online distribution channel in the French car sector, a market characterized by the prevalence of sales through car dealers and price discrimination. We estimate a structural model of demand with unobserved third-degree price discrimination and shopping costs related to visiting car dealers. We introduce, in counterfactual, the online distribution channel where prices are uniform and consumers benefit from lower shopping costs. When both sales channels are simultaneously available, competition from the online channel reduces the extent of price discrimination in the in-person channel. Generally, introducing an online distribution channel leads to market expansion and higher profits. Finally, we uncover significant heterogeneity in consumer surplus, indicating that an online distribution channel is advantageous for only a fraction of consumers.