How to use game theory to buy a car
timesonline.typepad.com
How to use game theory to buy a car
1–10 of 40 posts
Re: How to use game theory to buy a car
#2Regarding the advice on buying a car, it seems like a condensed version from the Motley Fool's Guide to buying a car, in the section titled "The Art of the Deal":
Re: How to use game theory to buy a car
#3A nice theory, but has it been tested? It assumes rational behavior on the part of the salesperson, not to mention assumes that the writer understands the motivations of the salesperson.
I once found a car salesman who was asking way too much for a used car on his lot. He refused to budge on price. I couldn't believe both that it was priced so high above market rates or that he wouldn't come down on the price at all. I kept asking, don't you need to go talk to your manager?
I decided that eventually he would come around and called him every day for two weeks with a low ball offer. Eventually the car sold to someone else for $100 above my offer. If rational behavior is to maximize the sale price, then this was not rational behavior. A simple counter offer would have closed the deal with me and netted an additional $500 for the dealer.
After that experience I've often wondered if there are other incentives for car salespeople beyond money. Maybe there's an opportunity cost of selling to a good negotiator when a bad (i.e. normal) negotiator might walk into the dealership. Maybe car salespeople just don't like being on the wrong side of a deal. Maybe they get harassed by coworkers when they strike a bad deal.
If the method works, I'd still be suspicious of the reasons. Maybe calling for 20 prices is a good idea just because one of them, independent of the others, really wants to get rid of the car.
Re: How to use game theory to buy a car
#4An oldie but goodie.
Corollary #1: Do the same thing, but everything in writing.
Corollary #2: Set up a leasing company and put Corollary #1 on your letterhead.
Re: How to use game theory to buy a car
#5A nice theory, but has it been tested? It assumes rational behavior on the part of the salesperson, not to mention assumes that the writer understands the motivations of the salesperson. I once found a car salesman who was asking way too much for a used car on his lot. He refused to budge on price. I couldn't believe both that it was priced so high above market rates or that he wouldn't come down on the price at all.…
A nice theory, but has it been tested?
Yes, for 30 years. It's simple supply and demand.
I doubt if this would work well for a 2010 Camaro, but there are probably lots of models it work work well for.
Re: How to use game theory to buy a car
#6I will not read this - but here is what I do:
Figure out the lowest price they can sell at, add $100 to that, walk out if they say no.
If you really want the car, add another $100. Still no, stand up and walk out. Really, you can live without the SUV.
Tell them you will discuss financing LATER. You have the total amount in cash [right?] so you can decide whether the financing deal they offer is better than a CD or T-bills.
If you don't have cash [stupid] get financing BEFORE you negotiate - talk to your credit union or LOCAL bank first.
How many times does this simple info have to be shared?
Oh, new Internet twist: do it all online.
Do not buy the floor mats and rustproofing.
Re: How to use game theory to buy a car
#7Is anyone else unable to go to this page in Chrome because it issues a bunch of Adobe errors? I'm using the latest dev build.
Re: How to use game theory to buy a car
#8Is anyone else unable to go to this page in Chrome because it issues a bunch of Adobe errors? I'm using the latest dev build.
[deleted]
Re: How to use game theory to buy a car
#9Is anyone else unable to go to this page in Chrome because it issues a bunch of Adobe errors? I'm using the latest dev build.
[deleted]
Re: How to use game theory to buy a car
#10A nice theory, but has it been tested? It assumes rational behavior on the part of the salesperson, not to mention assumes that the writer understands the motivations of the salesperson. I once found a car salesman who was asking way too much for a used car on his lot. He refused to budge on price. I couldn't believe both that it was priced so high above market rates or that he wouldn't come down on the price at all.…
A nice theory, but has it been tested? Yes, for 30 years. It's simple supply and demand. I doubt if this would work well for a 2010 Camaro, but there are probably lots of models it work work well for.
No, the article claims that this is some special game theory and that there are only 21 actors (you and the twenty salespeople). Modeling this in terms of S&D would take into account all potential purchasers.
My point, though, was that the article has presented a hypothesis without any data to back it up. In a way, it's worse than an anecdote, because I'm not sure even the author has tried this method.