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A Quantitative Analysis of the Used-Car Market

Alessandro Gavazza, Alessandro Lizzeri and Nikita Roketskiy ()

American Economic Review, 2014, vol. 104, issue 11, 3668-3700

Abstract: 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. 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.

JEL-codes: D23 L62 L81 (search for similar items in EconPapers)
Date: 2014
Note: DOI: 10.1257/aer.104.11.3668
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Working Paper: A quantitative analysis of the used-car market (2014) Downloads
Working Paper: A quantitative analysis of the used-car market (2012) Downloads
Working Paper: A Quantitative Analysis of the Used Car Market (2012) Downloads
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