A Quantitative Analysis of the Used-Car Market

Gavazza, Alessandro; Lizzeri, Alessandro; Roketskiy, Nikita

doi:10.2139/ssrn.2046363

Cited by 20 publications

(20 citation statements)

References 37 publications

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“…Gavazza, Lizzeri, and Roketskiy (2012) consider a model of secondary markets with heterogeneous consumers, transaction costs, and exogenous new good supply; the model successfully matches aggregate features of the US and French car markets.…”

Section: Opening Secondary Markets: a Taxonomy Of Effectsmentioning

confidence: 99%

When Do Secondary Markets Harm Firms?

Chen¹,

Esteban

Shum³

2013

American Economic Review

113

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In recent years, the rapid rise of Internet retailing has jump-started a multitude of markets for a wide spectrum of used goods: virtually everything is resold on the Internet, from animals to toys to books, plants, clothing, appliances; even automobiles and housing units. One market observer notes:[W ]e are beginning to embrace the notion of temporary ownership. We will soon live in a world where the norm is to sell our designer shoes after wearing them twice, where Verizon will automatically send us the newest, best, most high tech mobile phone every six months, and where we'll lease our Rolex watches instead of buying them. The "informed consumer" will soon choose the brand of her next handbag based on how much it will likely fetch on eBay next year-which corresponds to how much it will really cost her to own it up until then. 1Has this dramatic expansion in secondary markets (or "temporary ownership," to use the colorful terminology above) helped or hurt new good producers? In determining the gains from secondary markets, we classify various countervailing 1 From Nissanoff (2006, pp.8-9).

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Section: Opening Secondary Markets: a Taxonomy Of Effectsmentioning

confidence: 99%

When Do Secondary Markets Harm Firms?

Chen¹,

Esteban

Shum³

2013

American Economic Review

113

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“…12 Stolyarov (2002) and Gavazza, Lizzeri, and Roketskiy (2014) study trade in used cars in a model with transaction costs and consumers with heterogeneous utility from the service flow of durables. 13 An early literature making this case (including Martin (1962), Kleiman and Ophir (1966), Levhari andSrinivasan (1969), andSchmalensee (1970)) is shown by Swan (1970Swan ( , 1971Swan ( , 1972 and Sieper and Swan (1973) to be incorrect as the monopolist has the same incentives to minimize the cost of the provision a given service flow as a competitive producer.…”

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confidence: 99%

Financing Durable Assets

Rampini¹

2016

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This paper studies the effect of durability on the financing of durable assets. We show that more durable assets require larger down payments of internal funds per unit of capital making them harder to finance, because durability affects the price of an asset and hence the overall financing need more than its collateral value. This insight has implications for the choice between new and used capital, technology adoption, and the rent versus buy decision. Constrained borrowers purchase used assets which are less durable than new assets and adopt less durable, low quality assets, that are otherwise dominated technologies. More durable assets are more likely to be rented given their larger financing need. Legal enforcement affects trade and technology adoption; weak legal enforcement economies are net importers of used assets and invest a larger fraction in less durable, low quality assets. There is a critical distinction between the pledgeability and durability of assets: pledgeability facilitates financing whereas the net effect of durability is to impede financing.

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“…This information asymmetry indicates that buyers in used-goods markets may encounter a risk that the outcome will be significantly more favourable to the seller (for instance, Kwon, Dukes, Siddarth, & Silva-Risso, 2015). This effect is more pronounced in the dispersion of transaction prices: that is, the price range of used cars is approximately five times as much as that of new cars (Gavazza, Lizzeri, & Roketshiy, 2014). Such a wide range of prices suggests that buyers potentially benefit from engaging in information search before making a purchase because buyers with more information are likely to pay lower prices in markets where transaction prices are individually determined (Scott-Morton, Zettelmeyer, & Silva-Risso, 2003).…”

Section: Buyer-seller Relationships and Pre-purchase Information Searchmentioning

confidence: 99%

The (Dis)Advantage of Friendship on Information Search and Satisfaction

Kwon¹,

Walsh²,

Kim

2018

Can J Adm Sci

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Across four experiments, and focusing on consumer behaviour in a high uncertainty market (i.e., a used car market), this research shows that prior to a purchase, buyers are less motivated to search for information when they purchase a product from a friend (compared to someone they do not know). We also show that buyers are more willing to search for information after a transaction when sellers are their friends, a reversal in search behaviour due to the greater social risk that buyers bear when dealing with a friend. Finally, this research shows that both the transaction outcome (i.e., positive versus negative) and the buyer–seller relationship determine the degree to which people are satisfied or dissatisfied with a seller. Copyright © 2018 ASAC. Published by John Wiley & Sons, Ltd.

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A Quantitative Analysis of the Used-Car Market

Cited by 20 publications

References 37 publications

When Do Secondary Markets Harm Firms?

When Do Secondary Markets Harm Firms?

Financing Durable Assets

The (Dis)Advantage of Friendship on Information Search and Satisfaction

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