Search at Wholesale Auto Auctions
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. The author models 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. Copyright 1995, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
Volume (Year): 110 (1995)
Issue (Month): 1 (February)
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