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A quantitative analysis of the used-car market

Gavazza, Alessandro, Lizzeri, Alessandro and Roketskiy, Nikita (2014) A quantitative analysis of the used-car market. American Economic Review, 104 (11). pp. 3668-3700. ISSN 0002-8282

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Identification Number: 10.1257/aer.104.11.3668

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.

Item Type: Article
Official URL: https://www.aeaweb.org/aer/index.php
Additional Information: © 2014 American Economic Association
Divisions: Economics
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HE Transportation and Communications
H Social Sciences > HF Commerce
Sets: Departments > Economics
Date Deposited: 18 Feb 2014 15:45
Last Modified: 20 Jul 2019 01:51
URI: http://eprints.lse.ac.uk/id/eprint/55720

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