Question

When negotiating the price of any car, which of the following statements is true?

A) The car dealer earns a small profit if the customer doesn't negotiate and pays full price.
B) Dealers that negotiate will purposely price cars below the price for which they are willing to
sell the car.
C) Sales people are trained to act as if they are giving the car away.
D) Salespeople are uncertain of the price at which they can sell you the car until you begin
negotiations.

Answer 1

Salespeople usually have a strategy behind their pricing, aiming to balance generating sales with upholding a reputation for quality. A dealer can influence buyer perceptions through pricing, because buyers may equate price with the quality of cars due to imperfect market information.

Step-by-step explanation:

When negotiating the price of any car, it's important to understand the dynamics of pricing and quality perceptions in the market. Based on the provided information, if a car dealer has cars that are not selling, decreasing the price may not necessarily increase sales due to the assumption by buyers that a lower price indicates lower quality. However, imperfect information about the actual quality of cars can lead to such assumptions. Conversely, a dealer who increases prices might see an uptick in sales if customers associate higher prices with higher quality. Ultimately, dealers and salespeople are generally aware of their pricing strategies and the perceptions they create, and a good dealer will balance price with maintaining a reputation for quality to foster long-term reliability and customer trust.