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Automobile replacement: a dynamic structural approach

Schiraldi, Pasquale (2008) Automobile replacement: a dynamic structural approach. . Unpublished working paper, London, UK. (Submitted)

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Abstract

This paper specifies and estimates a structural dynamic model of consumer demand for new and used durable goods. Its primary contribution is to provide an explicit estimation procedure for transaction costs, which are crucial to capturing the dynamic nature of consumer decisions. In particular, transaction costs play a key role in determining consumer replacement behavior in both primary and secondary markets for durable goods. The unique data set used in this paper has been collected by the Italian Motor Registry and covers the period from 1994 to 2004. It includes information about sales dates for individual cars over time as well as the initial stock of cars in the sample period. Identification of transaction costs is achieved from the variation in the share of consumers choosing to hold a given car type each period, and from the share of consumers choosing to purchase the same car type that period. Specifically, I estimate a random coefficients discrete choice model that incorporates a dynamic optimal stopping problem in the spirit of Rust (1987). I apply this model to evaluate the impact of scrappage subsidies on the Italian automobile market in 1997 and 1998.

Item Type: Monograph (Working Paper)
Official URL: http://econ.lse.ac.uk/
Additional Information: © 2008 Pasquale Schiraldi
Divisions: Economics
Subjects: H Social Sciences > HD Industries. Land use. Labor
JEL classification: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods: General
L - Industrial Organization > L9 - Industry Studies: Transportation and Utilities > L92 - Railroads and Other Surface Transportation: Autos, Buses, Trucks, and Water Carriers; Ports
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance
C - Mathematical and Quantitative Methods > C6 - Mathematical Methods and Programming > C61 - Optimization Techniques; Programming Models; Dynamic Analysis
Sets: Departments > Economics
Date Deposited: 18 Jun 2009 08:30
Last Modified: 20 Feb 2019 03:09
URI: http://eprints.lse.ac.uk/id/eprint/21780

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