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A Quantitative Analysis of the Used-Car Market

Gavazza, A; Lizzeri, A; Roketskiy, N; (2014) A Quantitative Analysis of the Used-Car Market. American Economic Review , 104 (11) pp. 3668-3700. 10.1257/aer.104.11.3668. Green open access

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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.

Type: Article
Title: A Quantitative Analysis of the Used-Car Market
Open access status: An open access version is available from UCL Discovery
DOI: 10.1257/aer.104.11.3668
Publisher version: http://dx.doi.org/10.1257/aer.104.11.3668
Language: English
Additional information: Copyright © 2014 by the American Economic Association. Permission to make digital or hard copies of part or all of American Economic Association publications for personal or classroom use is granted without fee provided that copies are not distributed for profit or direct commercial advantage and that copies show this notice on the first page or initial screen of a display along with the full citation, including the name of the author. Copyrights for components of this work owned by others than AEA must be honored. Abstracting with credit is permitted. The author has the right to republish, post on servers, redistribute to lists and use any component of this work in other works. For others to do so requires prior specific permission and/or a fee. Permissions may be requested from the American Economic Association Administrative Office.
UCL classification: UCL
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/1476218
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