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- Title
Intermediaries and product quality in used car markets.
- Authors
Biglaiser, Gary; Li, Fei; Murry, Charles; Zhou, Yiyi
- Abstract
We present empirical evidence supporting that used cars sold by dealers have higher quality: (i) dealer transaction prices are higher than unmediated market prices, and this dealer premium increases in the age of the car as a ratio and is hump‐shaped in dollar value, and (ii) used cars purchased from dealers are less likely to be resold. In a model, we show that these empirical facts can be rationalized either when dealers alleviate information asymmetry, or when dealers facilitate assortative matching. The model predictions allow us to distinguish these two theories in the data, and we find evidence for both.
- Subjects
USED cars; PRODUCT quality; MARKET prices; INFORMATION asymmetry; MARKETS
- Publication
RAND Journal of Economics (Wiley-Blackwell), 2020, Vol 51, Issue 3, p905
- ISSN
0741-6261
- Publication type
Article
- DOI
10.1111/1756-2171.12344