Search at Wholesale Auto Auctions

David Genesove

The Quarterly Journal of Economics, 1995, vol. 110, issue 1, 23-49

Abstract: Wholesale trade in used cars is conducted by ascending bid auctions, with sale subject to the seller's acceptance of the winning bid. One out of three times the seller rejects the bid, and no trade takes place. I model the seller's decision as the outcome of search, and thus determined by the winning bid distribution, and a reported retail price. This market is ideal for testing search theory since all offers, whether or not accepted, are observed. Qualitative predictions of the theory, in particular the role of the variance, are confirmed. The quantitative results are more ambiguous.

Date: 1995
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