A quantitative analysis of the used-car market

Alessandro Gavazza, Alessandro Lizzeri, Nikita Roketskiy

Research output: Contribution to journalArticle

27 Scopus citations

Abstract

Quantitatively, we 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 US 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.

Original languageEnglish (US)
Pages (from-to)3668-3700
Number of pages33
JournalAmerican Economic Review
Volume104
Issue number11
DOIs
StatePublished - Nov 1 2014
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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