Durables and Lemons: Private Information and the Market for Cars
Publikation: Working paper › Forskning
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Durables and Lemons : Private Information and the Market for Cars. / Blundell, Richard; Gu, Ran; Leth-Petersen, Søren; Low, Hamish; Meghir, Costas.
2019.Publikation: Working paper › Forskning
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TY - UNPB
T1 - Durables and Lemons
T2 - Private Information and the Market for Cars
AU - Blundell, Richard
AU - Gu, Ran
AU - Leth-Petersen, Søren
AU - Low, Hamish
AU - Meghir, Costas
PY - 2019/9
Y1 - 2019/9
N2 - We specify an equilibrium model of car ownership with private information where individuals sell and purchase new and second-hand cars over their life-cycle. Private information induces a transaction cost and distorts the market reducing the value of a car as a savings instrument. We estimate the model using data on car ownership in Denmark, linked to register data. The lemons penalty is estimated to be 18% of the price in the first year of ownership, declining with the length of ownership. It leads to large reductions in the turnover of cars and in the probability of downgrading at job loss.
AB - We specify an equilibrium model of car ownership with private information where individuals sell and purchase new and second-hand cars over their life-cycle. Private information induces a transaction cost and distorts the market reducing the value of a car as a savings instrument. We estimate the model using data on car ownership in Denmark, linked to register data. The lemons penalty is estimated to be 18% of the price in the first year of ownership, declining with the length of ownership. It leads to large reductions in the turnover of cars and in the probability of downgrading at job loss.
U2 - 10.3386/w26281
DO - 10.3386/w26281
M3 - Working paper
VL - 26281
T3 - NBER Working Paper Series - National Bureau of Economic Research
BT - Durables and Lemons
ER -
ID: 242774825