Abstract
Wholesale trade in used cars is conducted by ascending bid auctions, with sale subject to the seller’s acceptance of the winning bid. One out of three times the seller rejects the bid, and no trade takes place. I model the seller’s decision as the outcome of search, and thus determined by the winning bid distribution, and a reported retail price. This market is ideal for testing search theory since all offers, whether or not accepted, are observed. Qualitative predictions of the theory, in particular the role of the variance, are confirmed. The quantitative results are more ambiguous.
| Original language | English |
|---|---|
| Pages (from-to) | 23-49 |
| Number of pages | 27 |
| Journal | Quarterly Journal of Economics |
| Volume | 110 |
| Issue number | 1 |
| DOIs | |
| State | Published - Feb 1995 |
| Externally published | Yes |
Bibliographical note
Funding Information:*This is a revision of a chapter of my dissertation, "Coconuts, Lemons and Pies: Search, Adverse Selection and Bargaining at Wholesale Auto Auctions." Funding from Princeton University's John M. Olin Program for the Study of Economic Organization and Public Policy, the Sloan Foundation, and the Social Sciences and Humanities Research Council of Canada is gratefully acknowledged. I am especially grateful to Mr. Clyde Hilwig of Automotive Market Report for allowing me access to the early editions of that publication.