A Quantitative Analysis of the Used-Car Market
AbstractWe 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. 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-valuation households can be large.
CitationGavazza, Alessandro, Alessandro Lizzeri, and Nikita Roketskiy. 2014. "A Quantitative Analysis of the Used-Car Market." American Economic Review, 104 (11): 3668-3700. DOI: 10.1257/aer.104.11.3668
- D23 Organizational Behavior; Transaction Costs; Property Rights
- L62 Automobiles; Other Transportation Equipment; Related Parts and Equipment
- L81 Retail and Wholesale Trade; e-Commerce