The Competitive Implications of a 'No-Haggle' Pricing Policy: The Access Toyota Case

Abstract

Using Toyota’s Access Program in Canada as a context, we explore the impact of a no-haggle, fixed-price strategy in a market where prices are typically negotiated. Since the program was implemented in all Canadian provinces except Ontario, this creates a natural experiment in which to examine the effect of a fixed-price strategy on the prices and sales of a firm and its close competitors whose prices are negotiated. We found that prices of Toyota models and their Honda counterparts were higher in provinces with the program. However, sales for Toyota (and the comparable Honda brands) remained the same after the program was introduced, despite the higher price. The only exceptions were their entry-level models whose prices remained the same across areas but who experienced an increase in sales. As Honda could have chosen to also implement a fixed-price policy, this suggests the possibility of an asymmetric price-policy equilibrium in the market.