Estimating the Effect of Salience in Wholesale and Retail Car Markets
AbstractWe investigate whether the first digit of an odometer reading is more salient to consumers than subsequent digits. We find that retail transaction prices and volumes of used vehicles drop discontinuously at 10,000-mile odometer thresholds, echoing effects found in the wholesale market by Lacetera, Pope and Sydnor (2012). Our results reveal that retail consumers devote limited attention to evaluating vehicle mileage, and that this drives effects in the wholesale market. We estimate the inattention parameter implied by the price discontinuities. In addition, our results suggest that estimating consumer-level structural parameters using data from an intermediate market can give misleading results.
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Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Review.
Volume (Year): 103 (2013)
Issue (Month): 3 (May)
Other versions of this item:
- Meghan R. Busse & Nicola Lacetera & Devin G. Pope & Jorge Silva-Risso & Justin R. Sydnor, 2013. "Estimating the Effect of Salience in Wholesale and Retail Car Markets," NBER Working Papers 18820, National Bureau of Economic Research, Inc.
- L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment
- L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Justin R. Sydnor & Devin G. Pope & Nicola Lacetera, 2011.
"Heuristic Thinking and Limited Attention in the Car Market,"
2011 Meeting Papers
105, Society for Economic Dynamics.
- Nicola Lacetera & Devin G. Pope & Justin R. Sydnor, 2012. "Heuristic Thinking and Limited Attention in the Car Market," American Economic Review, American Economic Association, vol. 102(5), pages 2206-36, August.
- Nicola Lacetera & Devin G. Pope & Justin R. Sydnor, 2011. "Heuristic Thinking and Limited Attention in the Car Market," NBER Working Papers 17030, National Bureau of Economic Research, Inc.
- Stefano DellaVigna, 2009.
"Psychology and Economics: Evidence from the Field,"
Journal of Economic Literature,
American Economic Association, vol. 47(2), pages 315-72, June.
- Meghan Busse & Jorge Silva-Risso & Florian Zettelmeyer, 2006. "$1,000 Cash Back: The Pass-Through of Auto Manufacturer Promotions," American Economic Review, American Economic Association, vol. 96(4), pages 1253-1270, September.
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