Intermediaries and product quality in used car markets

Gary Biglaiser, Fei Li (), Charles Murry and Yiyi Zhou

RAND Journal of Economics, 2020, vol. 51, issue 3, 905-933

Abstract: We present empirical evidence supporting that used cars sold by dealers have higher quality: (i) dealer transaction prices are higher than unmediated market prices, and this dealer premium increases in the age of the car as a ratio and is hump‐shaped in dollar value, and (ii) used cars purchased from dealers are less likely to be resold. In a model, we show that these empirical facts can be rationalized either when dealers alleviate information asymmetry, or when dealers facilitate assortative matching. The model predictions allow us to distinguish these two theories in the data, and we find evidence for both.

Date: 2020
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Citations: View citations in EconPapers (4)

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https://doi.org/10.1111/1756-2171.12344

Related works:
Working Paper: Intermediaries and Product Quality in Used Car Markets (2018)
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