Estimating the Effect of Salience in Wholesale and Retail Car Markets

Meghan R. Busse, Nicola Lacetera, Devin Pope, Jorge Silva-Risso and Justin R. Sydnor

No 18820, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We investigate whether the first digit of an odometer reading is more salient to consumers than subsequent digits. We find that retail transaction prices and volumes of used vehicles drop discontinuously at 10,000-mile odometer thresholds, echoing effects found in the wholesale market by Lacetera, Pope and Sydnor (2012). Our results reveal that retail consumers devote limited attention to evaluating vehicle mileage, and that this drives effects in the wholesale market. We estimate the inattention parameter implied by the price discontinuities. In addition, our results suggest that estimating consumer-level structural parameters using data from an intermediate market can give misleading results.

JEL-codes: D03 D12 L0 L62 (search for similar items in EconPapers)
Date: 2013-02
New Economics Papers: this item is included in nep-tre
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Published as Meghan R. Busse & Nicola Lacetera & Devin G. Pope & Jorge Silva-Risso & Justin R. Sydnor, 2013. "Estimating the Effect of Salience in Wholesale and Retail Car Markets," American Economic Review, American Economic Association, vol. 103(3), pages 575-79, May.

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