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Expectations Formation and Forecasting of Vehicle Demand: An Empirical Study of the Vehicle Quota Auctions in Singapore

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Author Info

  • Sing-Fat Chu

    ()
    (National University of Singapore)

  • Winston T.H. Koh

    ()
    (School of Economics and Social Sciences, Singapore Management University)

  • Yiu Kuen Tse

    ()
    (School of Economics and Social Sciences, Singapore Management University)

Abstract

This paper studies the expectations formation and forecasting of vehicle demand in Singapore under the vehicle quota system. Under the system, a car buyer must first bid for a vehicle license in monthly auctions in order to purchase a new car. We construct an econometric model to test the hypothesis that past bid distributions of the license auctions contain information that car buyers can use to update their expectations about the intensity of market demand, forecast the license premiums and formulate their bidding strategies in future auctions. Our empirical analysis indicates that past bid distributions have a good degree of predictive power for the license premiums.

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Bibliographic Info

Paper provided by Singapore Management University, School of Economics in its series Working Papers with number 02-2004.

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Length: 24 pages
Date of creation: Dec 2003
Date of revision:
Publication status: Published in SMU Economics and Statistics Working Paper Series
Handle: RePEc:siu:wpaper:02-2004

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Related research

Keywords: quota licenses; vehicle demand; learning; expectations formation;

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References

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  1. Hendricks, K. & Paarsch, H.J., 1993. "A Survey of Recent Empirical Work Concerning Auctions," UWO Department of Economics Working Papers 9309, University of Western Ontario, Department of Economics.
  2. Klemperer, P., 1999. "Auction Theory: a Guide to the Literature," Economics Papers 1999-w12, Economics Group, Nuffield College, University of Oxford.
  3. Ling Hui Tan, 2001. "Rationing Rules and Outcomes," IMF Working Papers 01/136, International Monetary Fund.
  4. Paul Milgrom & Robert J. Weber, 1981. "A Theory of Auctions and Competitive Bidding," Discussion Papers 447R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  5. Chin, Anthony & Smith, Peter, 1997. "Automobile ownership and government policy: The economics of Singapore's vehicle quota scheme," Transportation Research Part A: Policy and Practice, Elsevier, vol. 31(2), pages 129-140, March.
  6. Phang, Sock-Yong, 1993. "Singapore's motor vehicle policy: Review of recent changes and a suggested alternative," Transportation Research Part A: Policy and Practice, Elsevier, vol. 27(4), pages 329-336, July.
  7. Koh, Winston T. H., 2003. "Control of vehicle ownership and market competition: theory and Singapore's experience with the vehicle quota system," Transportation Research Part A: Policy and Practice, Elsevier, vol. 37(9), pages 749-770, November.
  8. Levin, Dan & Kagel, John H & Richard, Jean-Francois, 1996. "Revenue Effects and Information Processing in English Common Value Auctions," American Economic Review, American Economic Association, vol. 86(3), pages 442-60, June.
  9. Chu, Singfat, 2002. "Auctioning rights to vehicle ownership: Singapore's experience with sealed-bid tenders," Transportation Research Part A: Policy and Practice, Elsevier, vol. 36(6), pages 555-561, July.
  10. Singfat, Chu-Chun-Lin, 1998. "Bidding Efficiencies for Rights to Car Ownership in Singapore," Omega, Elsevier, vol. 26(2), pages 297-306, April.
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Cited by:
  1. Singfat Chu, 2011. "Sealed v/s open bids for certificates of entitlement under the vehicle quota system in Singapore," Transportation, Springer, vol. 38(2), pages 215-226, March.

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