Blundell, Richard
[Author]
;
Gu, Ran
[Other];
Leth-Petersen, Søren
[Other];
Low, Hamish
[Other];
Meghir, Costas
[Other]National Bureau of Economic Research
Durables and Lemons
: Private Information and the Market for Cars
imprint:
Cambridge, Mass: National Bureau of Economic Research, 2019
Published in:NBER working paper series ; no. w26281
Extent:
1 Online-Ressource; illustrations (black and white)
Language:
English
DOI:
10.3386/w26281
Identifier:
Reproduction note:
Hardcopy version available to institutional subscribers
Origination:
Footnote:
System requirements: Adobe [Acrobat] Reader required for PDF files
Mode of access: World Wide Web
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