Durables and lemons: private information and the market for cars
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 mo...
| Main Authors: | , , , , |
|---|---|
| Format: | Working paper |
| Published: |
University of Oxford
2019
|
| _version_ | 1797064612653301760 |
|---|---|
| author | Low, H Blundell, R Gu, R Leth-Petersen, S Meghir, C |
| author_facet | Low, H Blundell, R Gu, R Leth-Petersen, S Meghir, C |
| author_sort | Low, H |
| collection | OXFORD |
| description | 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. |
| first_indexed | 2024-03-06T21:16:52Z |
| format | Working paper |
| id | oxford-uuid:40137c1b-00b2-4716-8971-0271f3993c59 |
| institution | University of Oxford |
| last_indexed | 2024-03-06T21:16:52Z |
| publishDate | 2019 |
| publisher | University of Oxford |
| record_format | dspace |
| spelling | oxford-uuid:40137c1b-00b2-4716-8971-0271f3993c592022-03-26T14:35:51ZDurables and lemons: private information and the market for carsWorking paperhttp://purl.org/coar/resource_type/c_8042uuid:40137c1b-00b2-4716-8971-0271f3993c59Symplectic ElementsBulk import via SwordUniversity of Oxford2019Low, HBlundell, RGu, RLeth-Petersen, SMeghir, CWe 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. |
| spellingShingle | Low, H Blundell, R Gu, R Leth-Petersen, S Meghir, C Durables and lemons: private information and the market for cars |
| title | Durables and lemons: private information and the market for cars |
| title_full | Durables and lemons: private information and the market for cars |
| title_fullStr | Durables and lemons: private information and the market for cars |
| title_full_unstemmed | Durables and lemons: private information and the market for cars |
| title_short | Durables and lemons: private information and the market for cars |
| title_sort | durables and lemons private information and the market for cars |
| work_keys_str_mv | AT lowh durablesandlemonsprivateinformationandthemarketforcars AT blundellr durablesandlemonsprivateinformationandthemarketforcars AT gur durablesandlemonsprivateinformationandthemarketforcars AT lethpetersens durablesandlemonsprivateinformationandthemarketforcars AT meghirc durablesandlemonsprivateinformationandthemarketforcars |