Has the Internet Eliminated Regional Price Differences? Evidence from the Used Car Market

Abstract

SummaryWe study the effects of the Internet on regional price differences. Comparing two Dutch regions, we find that before the rise of the Internet, price differences of used cars between those regions amounted to some 11-15%, controlling for mileage, age, fuel type and engine volume. These price differences have completely disappeared after the rise of the Internet, in particular a website that allows consumers to make detailed comparisons between almost all used cars for sale in the Netherlands.

How does a large-scale disaster impact on the used-car market? A case study of the Great East Japan Earthquake and Tsunami

“…Another study which examines new-and usedcar market data in Germany shows that fuel consumption is an important determinant of the price more in the used-car market than the new car market [7]. Haan and de Boer [6] compare used-car advertisements data in two Dutch regions before and after the rise of the Internet and find that price differences of used cars between International Journal of Economic Policy Studies (2019) 13:89-117 those regions in the 1990s disappeared in 2005. All these studies use the hedonic model to estimate used-car prices.…”

“…Therefore, our analysis is able to cover demand including the demand of people who are unfamiliar with the Internet because our data does not favor the demand of people who have access to the Internet. 6 After the Great East Japan Earthquake and Tsunami, 'Goo' suspended publication of the issue for the first half of April in the damaged area. In total, we analyzed data of 72 issues covering a three-year period (2010-2012).…”

“…To analyze which car types and what kinds of car features are needed in the damaged area, this paper investigates the differences of used-car prices, which are controlled by observable car characteristics, between the damaged area and the non-damaged area. The model of Haan and de Boer [6] that also examines the differences between two regions is applied to our analysis. We use the following equation:…”

“…We could look into R i to analyze the price differences between the damaged area and non-damaged area by controlling the used-car prices with the observable characteristics of the used cars based on the hedonic model. For the control variables X i , this paper applies those used in Haan and de Boer [6]:…”

“…Transmission X 1i = Transmission dummy (Automatic = 1, others = 0) Fuel X 2i = Diesel dummy (Diesel = 1, others = 0) X 3i = Gas Hybrid dummy (Gas Hybrid = 1, others = 0) X 4i = EV dummy (EV = 1, others = 0) X 5i = PHV dummy (PHV = 1, others = 0) X 6i = Other fuels dummy (LPG, CNG or FC = 1, others = 0) Age X 7i = Age (in years) Kilometers driven X 8i = Kilometers driven X 9i = 100,000 km dummy (over 100,000 km driven = 1, others = 0) Engine Volume X 10i = Engine volume (cc) In addition to these control variables used in Haan and de Boer [6], we add a vehicle inspection certificate dummy in order to assess newspaper reports [1,13].…”