A quantitative analysis of the used-car market

Alessandro Gavazza, Alessandro Lizzeri and Nikita Roketskiy ()

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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: L81 N0 (search for similar items in EconPapers)
Date: 2014-11
New Economics Papers: this item is included in nep-com, nep-ind, nep-mkt and nep-tre
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (33)

Published in American Economic Review, November, 2014, 104(11), pp. 3668-3700. ISSN: 0002-8282

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http://eprints.lse.ac.uk/55720/ Open access version. (application/pdf)

Related works:
Journal Article: A Quantitative Analysis of the Used-Car Market (2014)
Working Paper: A quantitative analysis of the used-car market (2012)
Working Paper: A Quantitative Analysis of the Used Car Market (2012)
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