The effect of information on market activity; evidence from vehicle recalls

Inge van den Bijgaart and Davide Cerruti ()

No 20/343, CER-ETH Economics working paper series from CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich

Abstract: We evaluate the effect of vehicle recalls on vehicle transactions in the second-hand market. Using a rich dataset of Dutch vehicle registrations, we exploit the quasi-experimental variation in recalls across nearly-identical cars. We find strong heterogeneities across market segment: vehicles with a lower (higher) list price or some (zero) defects experience an increase (decrease) in transactions after a recall. 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.

Keywords: Vehicles; recalls; adverse selection; sorting; information (search for similar items in EconPapers)
JEL-codes: D12 D83 L15 L62 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2020-10
New Economics Papers: this item is included in nep-eur and nep-tre
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Related works:
Journal Article: The Effect of Information on Market Activity: Evidence from Vehicle Recalls (2024)
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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Persistent link: https://EconPapers.repec.org/RePEc:eth:wpswif:20-343

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