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A quantitative analysis of the used-car market

Alessandro Gavazza, Alessandro Lizzeri and Nikita Rokestkiy
Authors registered in the RePEc Author Service: Nikita Roketskiy ()

MPRA Paper from University Library of Munich, Germany

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. We explore how the income distribution affects this heterogeneity--income is an important determinant of willingness to pay for quality. 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-income households can be large.

Keywords: Durable Goods; Secondary Markets; Income Heterogeneity (search for similar items in EconPapers)
JEL-codes: D12 L62 E10 (search for similar items in EconPapers)
Date: 2012-04-25
New Economics Papers: this item is included in nep-tre
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Related works:
Journal Article: A Quantitative Analysis of the Used-Car Market (2014) Downloads
Working Paper: A quantitative analysis of the used-car market (2014) Downloads
Working Paper: A Quantitative Analysis of the Used Car Market (2012) Downloads
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