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Competition and Car Longevity

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  • Macauley, Molly

    ()
    (Resources for the Future)

  • Hamilton, Bruce

Abstract

We examine determinants of the nearly 30 percent increase in the average age of domestically produced, registered automobiles since the mid-1960s. We find that very little of the increase in car longevity is attributable to improvements in the inherent durability of cars. Rather, we find that the temporal pattern of longevity improvement is highly correlated with the level of market concentration in the auto industry. In particular, we argue that the arrival of competition in the industry led to an increase in longevity largely by forcing a reduction in the price of auto maintenance and repair, which in turn induced consumers to maintain their cars into older age.

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Bibliographic Info

Paper provided by Resources For the Future in its series Discussion Papers with number dp-98-20.

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Date of creation: 01 Mar 1998
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Handle: RePEc:rff:dpaper:dp-98-20

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  1. Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-49, April.
  2. Parks, Richard W, 1977. "Determinants of Scrapping Rates for Postwar Vintage Automobiles," Econometrica, Econometric Society, vol. 45(5), pages 1099-1115, July.
  3. Robert J. Gordon, 1990. "The Measurement of Durable Goods Prices," NBER Books, National Bureau of Economic Research, Inc, number gord90-1, May.
  4. Schmalensee, Richard, 1979. "Market Structure, Durability, and Quality: A Selective Survey," Economic Inquiry, Western Economic Association International, vol. 17(2), pages 177-96, April.
  5. Anna Alberini & Winston Harrington & Virginia McConnell, 1995. "Determinants of Participation in Accelerated Vehicle-Retirement Programs," RAND Journal of Economics, The RAND Corporation, vol. 26(1), pages 93-112, Spring.
  6. Bruce W Hamilton & Mary Burke, 1996. "The Coase Conjecture in Continuous Time: Imperfect Durability Endogenous Durability and Aftermarkets," Economics Working Paper Archive 362, The Johns Hopkins University,Department of Economics.
  7. Robert W. Hahn, 1995. "An Economic Analysis of Scrappage," RAND Journal of Economics, The RAND Corporation, vol. 26(2), pages 222-242, Summer.
  8. Gordon, Robert J., 1990. "The Measurement of Durable Goods Prices," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226304557.
  9. Eric W. Bond & Larry Samuelson, 1984. "Durable Good Monopolies with Rational Expectations and Replacement Sales," RAND Journal of Economics, The RAND Corporation, vol. 15(3), pages 336-345, Autumn.
  10. Timothy F. Bresnahan, 1986. "Crandall, Gruenspecht, Keeler, and Lave's Regulating the Automobile," RAND Journal of Economics, The RAND Corporation, vol. 17(4), pages 641-645, Winter.
  11. Bulow, Jeremy, 1986. "An Economic Theory of Planned Obsolescence," The Quarterly Journal of Economics, MIT Press, vol. 101(4), pages 729-49, November.
  12. Alan Greenspan & Darrel Cohen, 1996. "Motor vehicle stocks, scrappage, and sales," Finance and Economics Discussion Series 96-40, Board of Governors of the Federal Reserve System (U.S.).
  13. Swan, Peter L, 1972. "Optimum Durability, Second-Hand Markets, and Planned Obsolescence," Journal of Political Economy, University of Chicago Press, vol. 80(3), pages 575-85, May-June.
  14. Schmalensee, Richard, 1974. "Market Structure, Durability, and Maintenance Effort," Review of Economic Studies, Wiley Blackwell, vol. 41(2), pages 277-87, April.
  15. Gruenspecht, Howard K, 1982. "Differentiated Regulation: The Case of Auto Emissions Standards," American Economic Review, American Economic Association, vol. 72(2), pages 328-31, May.
  16. Goldberg, Pinelopi Koujianou, 1995. "Product Differentiation and Oligopoly in International Markets: The Case of the U.S. Automobile Industry," Econometrica, Econometric Society, vol. 63(4), pages 891-951, July.
  17. Rust, John, 1986. "When Is It Optimal to Kill Off the Market for Used Durable Goods?," Econometrica, Econometric Society, vol. 54(1), pages 65-86, January.
  18. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
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Cited by:
  1. BOUCEKKINE, Raouf & DEL RIO, Fernando & MARTINEZ, Blanca, . "Technological progress, obsolescence, and depreciation," CORE Discussion Papers RP -2116, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  2. Robert H. Porter & Peter Sattler, 1999. "Patterns of Trade in the Market for Used Durables: Theory and Evidence," NBER Working Papers 7149, National Bureau of Economic Research, Inc.
  3. Karl Storchmann, 2004. "On the Depreciation of Automobiles: An International Comparison," Transportation, Springer, vol. 31(4), pages 371-408, November.
  4. Raouf Boucekkine & Blanca Martínez & Fernando del Río, 2005. "Technological Progress And Depreciation," Working Papers. Serie AD 2005-22, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  5. 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.

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  1. Studies on the automobile industry

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