The Markup for Lemons: Quality and Uncertainty in American and British Used-Car Markets, c. 1953-1973
Automobile depreciation rates and dealer markups in the United States and Britain during the 1950s and 1960s provide evidence on the effect of asymmetric information on market structures. Initial depreciation was not exceptional, and trade was not disabled. ‘Lemon’ effects were evident in some periods but not others. Depreciation and markups increased with mechanical and styling uncertainty. Adverse selection kicked in as cars aged: high selling costs caused dealers to withdraw from trading older cars. Despite their lower quality, British makes depreciated less, probably due to different novelty signals and longer styling cycles.
|Date of creation:||01 Sep 2005|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.nuff.ox.ac.uk/economics/|
References listed on IDEAS
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.:
- Avner Offer, 1997.
"The American Automobile Frenzy of the 1950s,"
Oxford University Economic and Social History Series
_011, Economics Group, Nuffield College, University of Oxford.
- Coase, Ronald H, 1972. "Durability and Monopoly," Journal of Law and Economics, University of Chicago Press, vol. 15(1), pages 143-49, April.
- Alessandro Lizzeri & Igal Hendel, 1999.
"Adverse Selection in Durable Goods Markets,"
American Economic Review,
American Economic Association, vol. 89(5), pages 1097-1115, December.
- Pashigian, B Peter & Bowen, Brian & Gould, Eric, 1995. "Fashion, Styling, and the Within-Season Decline in Automobile Prices," Journal of Law and Economics, University of Chicago Press, vol. 38(2), pages 281-309, October.
- Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, vol. 84(3), pages 488-500, August.
- Devavrat Purohit, 1992. "Exploring the Relationship Between the Markets for New and Used Durable Goods: The Case of Automobiles," Marketing Science, INFORMS, vol. 11(2), pages 154-167.
- David W. Harless & George E. Hoffer, 2002. "Do Women Pay More for New Vehicles? Evidence from Transaction Price Data," American Economic Review, American Economic Association, vol. 92(1), pages 270-279, March.
- Wykoff, Frank C, 1973. "A User Cost Approach to New Automobile Purchases," Review of Economic Studies, Wiley Blackwell, vol. 40(3), pages 377-90, July.
- Genesove, David, 1993. "Adverse Selection in the Wholesale Used Car Market," Journal of Political Economy, University of Chicago Press, vol. 101(4), pages 644-65, August.
When requesting a correction, please mention this item's handle: RePEc:nuf:esohwp:_060. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Maxine Collett)
If references are entirely missing, you can add them using this form.