Gavazza, Alessandro and Lizzeri, Alessandro and Rokestkiy, Nikita (2012): A quantitative analysis of the used-car market.
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We quantitatively investigate the allocative and welfare effects of secondary markets for cars. An important source of gains from trade in these markets is the heterogeneity in the willingness to pay for higher-quality (newer) goods, but transaction costs are an impediment to instantaneous trade. We explore how the income distribution affects this heterogeneity--income is an important determinant of willingness to pay for quality. Calibration of the model successfully matches several aggregate features of the U.S. and French used-car markets. Counterfactual analyses show that transaction costs have a large effect on volume of trade, allocations, and the primary market. Aggregate effects on consumer surplus and welfare are relatively small, but the effect on lower-income households can be large.
|Item Type:||MPRA Paper|
|Original Title:||A quantitative analysis of the used-car market|
|Keywords:||Durable Goods, Secondary Markets, Income Heterogeneity|
|Subjects:||D - Microeconomics > D1 - Household Behavior and Family Economics > D12 - Consumer Economics: Empirical Analysis
L - Industrial Organization > L6 - Industry Studies: Manufacturing > L62 - Automobiles; Other Transportation Equipment
E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models > E10 - General
|Depositing User:||Alessandro Gavazza|
|Date Deposited:||28. Apr 2012 03:28|
|Last Modified:||12. Feb 2013 21:27|
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