A quantitative analysis of the used-car market

Alessandro Gavazza, Alessandro Lizzeri, Nikita Roketskiy

    Research output: Contribution to journalArticle

    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

    ASJC Scopus subject areas

    • Economics and Econometrics

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  • Cite this

    Gavazza, A., Lizzeri, A., & Roketskiy, N. (2014). A quantitative analysis of the used-car market. American Economic Review, 104(11), 3668-3700. https://doi.org/10.1257/aer.104.11.3668