The Effect of Information on Market Activity: Evidence from Vehicle Recalls

Inge van den Bijgaart and Davide Cerruti ()
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Inge van den Bijgaart: Utrecht University and University of Gothenburg

The Review of Economics and Statistics, 2024, vol. 106, issue 1, 230-245

Abstract: We evaluate the effect of vehicle recalls on vehicle transactions in the second-hand market. Using a rich data set of Dutch vehicle registrations, we exploit the quasiexperimental variation in recalls across nearly identical cars. We find strong heterogeneities across market segments: transactions increased for cars with lower listed price or with defects, and decreased for those with higher price or no defects. Based on our theoretical model, this suggests that recalls increase sorting in low-end markets, yet exacerbate adverse selection in high-end markets. Our results shed light on the effect of information arrival in markets subject to uncertainty and information asymmetries.

Date: 2024
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https://doi.org/10.1162/rest_a_01164
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Related works:
Working Paper: The Effect of Information on Market Activity; Evidence from Vehicle Recalls (2020)
Working Paper: The effect of information on market activity; evidence from vehicle recalls (2020)
Working Paper: The effect of information on market activity; evidence from vehicle recalls (2020)
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