IDEAS home Printed from https://ideas.repec.org/p/cdl/itsdav/qt4gw9d288.html
   My bibliography  Save this paper

Internet and the Efficiency of Decentralized Markets: Evidence from Automobiles

Author

Listed:
  • Rapson, David

Abstract

We estimate the causal effect of Internet on volume of trade in a major distributed marketplace. From 1997 to 2007, a period during which residential Internet use tripled, Internet increased the volume of used cars traded in California by 7.2 percent. This implies a substantial welfare gain due to reductions in market frictions of approximately $43 million per year relative to 1997 Internet penetration levels. These gains are likely attributable to search and matching cost reductions and increased symmetry of information availability across buyers and sellers. Intriguingly, the effect is stronger in thick markets and urban areas, implying that Internet may help to diminish choice overload. Our results suggest that policies promoting broadband Internet deployment may enhance efficiency.

Suggested Citation

  • Rapson, David, 2012. "Internet and the Efficiency of Decentralized Markets: Evidence from Automobiles," Institute of Transportation Studies, Working Paper Series qt4gw9d288, Institute of Transportation Studies, UC Davis.
    • Handle: RePEc:cdl:itsdav:qt4gw9d288
    as

    Download full text from publisher

    File URL: https://www.escholarship.org/uc/item/4gw9d288.pdf;origin=repeccitec
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Pasquale Schiraldi, 2011. "Automobile replacement: a dynamic structural approach," RAND Journal of Economics, RAND Corporation, vol. 42(2), pages 266-291, June.
    2. Alessandro Gavazza & Alessandro Lizzeri & Nikita Roketskiy, 2014. "A Quantitative Analysis of the Used-Car Market," American Economic Review, American Economic Association, vol. 104(11), pages 3668-3700, November.
    3. Konishi, Hideo & Sandfort, Michael T., 2002. "Existence of stationary equilibrium in the markets for new and used durable goods," Journal of Economic Dynamics and Control, Elsevier, vol. 26(6), pages 1029-1052, June.
    4. Alessandro Lizzeri & Igal Hendel, 1999. "Adverse Selection in Durable Goods Markets," American Economic Review, American Economic Association, vol. 89(5), pages 1097-1115, December.
    5. Anindya Ghose & Michael D. Smith & Rahul Telang, 2006. "Internet Exchanges for Used Books: An Empirical Analysis of Product Cannibalization and Welfare Impact," Information Systems Research, INFORMS, vol. 17(1), pages 3-19, March.
    6. Rust, John, 1985. "Stationary Equilibrium in a Market for Durable Assets," Econometrica, Econometric Society, vol. 53(4), pages 783-805, July.
    7. Jiawei Chen & Susanna Esteban & Matthew Shum, 2010. "How much competition is a secondary market?," Working Papers 2010-06, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.
    8. Anderson, Simon P. & Ginsburgh, Victor A., 1994. "Price discrimination via second-hand markets," European Economic Review, Elsevier, vol. 38(1), pages 23-44, January.
    9. Glenn Ellison & Sara Fisher Ellison, 2005. "Lessons About Markets from the Internet," Journal of Economic Perspectives, American Economic Association, vol. 19(2), pages 139-158, Spring.
    10. Pasquale Schiraldi & Francesco Nava, 2012. "Resale and Collusion in A Dynamic Market for Semidurable Goods," Journal of Industrial Economics, Wiley Blackwell, vol. 60(2), pages 274-298, June.
    11. Jeffrey R. Brown & Austan Goolsbee, 2002. "Does the Internet Make Markets More Competitive? Evidence from the Life Insurance Industry," Journal of Political Economy, University of Chicago Press, vol. 110(3), pages 481-507, June.
    12. Eugene Orlov, 2011. "How Does The Internet Influence Price Dispersion? Evidence From The Airline Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 59(1), pages 21-37, March.
    13. Jiawei Chen & Susanna Esteban & Matthew Shum, 2013. "When Do Secondary Markets Harm Firms?," American Economic Review, American Economic Association, vol. 103(7), pages 2911-2934, December.
    14. Erik Brynjolfsson & Yu (Jeffrey) Hu & Michael D. Smith, 2003. "Consumer Surplus in the Digital Economy: Estimating the Value of Increased Product Variety at Online Booksellers," Management Science, INFORMS, vol. 49(11), pages 1580-1596, November.
    15. Dmitriy Stolyarov, 2002. "Turnover of Used Durables in a Stationary Equilibrium: Are Older Goods Traded More?," Journal of Political Economy, University of Chicago Press, vol. 110(6), pages 1390-1413, December.
    16. Alessandro Gavazza, 2011. "The Role of Trading Frictions in Real Asset Markets," American Economic Review, American Economic Association, vol. 101(4), pages 1106-1143, June.
    17. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-890, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Suvrat Dhanorkar & Suresh Muthulingam, 2020. "Do E‐Waste Laws Create Behavioral Spillovers? Quasi‐Experimental Evidence from California," Production and Operations Management, Production and Operations Management Society, vol. 29(7), pages 1738-1766, July.
    2. Mehmet Gümüş & Saibal Ray & Shuya Yin, 2013. "Returns Policies Between Channel Partners for Durable Products," Marketing Science, INFORMS, vol. 32(4), pages 622-643, July.
    3. Fremstad, Anders, 2017. "Does Craigslist Reduce Waste? Evidence from California and Florida," Ecological Economics, Elsevier, vol. 132(C), pages 135-143.
    4. Liu, Ting & Schiraldi, Pasquale, 2014. "Buying frenzies in durable-goods markets," European Economic Review, Elsevier, vol. 70(C), pages 1-16.
    5. Yang Liu & Yaojun Fan & Yifan Wang & Jiayu Huang & Hu Xun, 2024. "City innovation ability and internet infrastructure development: Evidence from the “Broadband China” policy," Bulletin of Economic Research, Wiley Blackwell, vol. 76(1), pages 121-146, January.
    6. Eleni Laitsou & Antonios Kargas & Dimitrios Varoutas, 2020. "How ICT affects economic growth in the Euro area during the economic crisis," Netnomics, Springer, vol. 21(1), pages 59-81, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alessandro Gavazza & Alessandro Lizzeri & Nikita Roketskiy, 2014. "A Quantitative Analysis of the Used-Car Market," American Economic Review, American Economic Association, vol. 104(11), pages 3668-3700, November.
    2. Andrikopoulos, Athanasios & Markellos, Raphael N., 2015. "Dynamic interaction between markets for leasing and selling automobiles," Journal of Banking & Finance, Elsevier, vol. 50(C), pages 260-270.
    3. Alessandro Gavazza & Andrea Lanteri, 2021. "Credit Shocks and Equilibrium Dynamics in Consumer Durable Goods Markets [“Balladurette and Juppette: A Discrete Analysis of Scrapping Subsidies”]," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(6), pages 2935-2969.
    4. Masakazu Ishihara & Andrew T. Ching, 2019. "Dynamic Demand for New and Used Durable Goods Without Physical Depreciation: The Case of Japanese Video Games," Marketing Science, INFORMS, vol. 38(3), pages 392-416, May.
    5. Kenneth Gillingham & Fedor Iskhakov & Anders Munk-Nielsen & John Rust & Bertel Schjerning, 2019. "Equilibrium trade in automobile markets," CESifo Working Paper Series 7650, CESifo.
    6. James D. Dana Jr. & Eugene Orlov Jr., 2014. "Internet Penetration and Capacity Utilization in the US Airline Industry," American Economic Journal: Microeconomics, American Economic Association, vol. 6(4), pages 106-137, November.
    7. Susanna Esteban & Matthew Shum, 2007. "Durable-goods oligopoly with secondary markets: the case of automobiles," RAND Journal of Economics, RAND Corporation, vol. 38(2), pages 332-354, June.
    8. Chen, Jiawei & Esteban, Susanna & Shum, Matthew, 2008. "Demand and supply estimation biases due to omission of durability," Journal of Econometrics, Elsevier, vol. 147(2), pages 247-257, December.
    9. Clerides, Sofronis & Hadjiyiannis, Costas, 2008. "Quality standards for used durables: An indirect subsidy?," Journal of International Economics, Elsevier, vol. 75(2), pages 268-282, July.
    10. Konishi, Hideo & Sandfort, Michael T., 2002. "Existence of stationary equilibrium in the markets for new and used durable goods," Journal of Economic Dynamics and Control, Elsevier, vol. 26(6), pages 1029-1052, June.
    11. Kumar, Praveen, 2002. "Price and quality discrimination in durable goods monopoly with resale trading," International Journal of Industrial Organization, Elsevier, vol. 20(9), pages 1313-1339, November.
    12. Liu, Ting & Schiraldi, Pasquale, 2014. "Buying frenzies in durable-goods markets," European Economic Review, Elsevier, vol. 70(C), pages 1-16.
    13. Raghunath Singh Rao & Om Narasimhan & George John, 2009. "Understanding the Role of Trade-Ins in Durable Goods Markets: Theory and Evidence," Marketing Science, INFORMS, vol. 28(5), pages 950-967, 09-10.
    14. Aditya Vedantam & Emre M. Demirezen & Subodha Kumar, 2021. "Trade‐In or Sell in My P2P Marketplace: A Game Theoretic Analysis of Profit and Environmental Impact," Production and Operations Management, Production and Operations Management Society, vol. 30(11), pages 3923-3942, November.
    15. Lacourbe, Paul, 2016. "Durable goods leasing in the presence of exporting used products to an international secondary market," European Journal of Operational Research, Elsevier, vol. 250(2), pages 448-456.
    16. Gøril L. Andreassen & Jo Thori Lind, 2022. "Climate, Technology and Value: Insights from the First Decade with Mass-Consumption of Electric Vehicles," CESifo Working Paper Series 9814, CESifo.
    17. Benjamin Shiller, 2013. "Digital distribution and the prohibition of resale markets for information goods," Quantitative Marketing and Economics (QME), Springer, vol. 11(4), pages 403-435, December.
    18. Samuel P. Fraiberger & Arun Sundararajan, 2015. "Peer-to-Peer Rental Markets in the Sharing Economy," Working Papers 15-19, NET Institute.
    19. Raymond Deneckere & Meng‐Yu Liang, 2008. "Imperfect durability and the Coase conjecture," RAND Journal of Economics, RAND Corporation, vol. 39(1), pages 1-19, March.
    20. Zhang, Zhichao & Xu, Haiyan & Chen, Kebing & Zhao, Yingxue & Liu, Zhi, 2023. "Channel mode selection for an e-platform supply chain in the presence of a secondary marketplace," European Journal of Operational Research, Elsevier, vol. 305(3), pages 1215-1235.

    More about this item

    Keywords

    Engineering;

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • L9 - Industrial Organization - - Industry Studies: Transportation and Utilities

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cdl:itsdav:qt4gw9d288. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Lisa Schiff (email available below). General contact details of provider: https://edirc.repec.org/data/itucdus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.