Heuristic Thinking and Limited Attention in the Car Market
Can heuristic information processing affect important product markets? We explore whether the tendency to focus on the left-most digit of a number affects how used car buyers incorporate odometer values in their purchase decisions. Analyzing over 22 million wholesale used-car transactions, we find substantial evidence of this left-digit bias; there are large and discontinuous drops in sale prices at 10,000-mile thresholds in odometer mileage, along with smaller drops at 1,000-mile thresholds. We obtain estimates for the inattention parameter in a simple model of this left-digit bias. We also investigate whether this heuristic behavior is primarily attributable to the final used-car customers or the used-car salesmen who buy cars in the wholesale market. The evidence is most consistent with partial inattention by final customers. We discuss the significance of these results for the literature on inattention and point to other market settings where this type of heuristic thinking may be important. Our results suggest that information-processing heuristics may be important even in market settings with large stakes and where information is easy to observe.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||2011|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.EconomicDynamics.org/society.htmEmail:
More information through EDIRC
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.:
- Stefano DellaVigna, 2007.
"Psychology and Economics: Evidence from the Field,"
NBER Working Papers
13420, National Bureau of Economic Research, Inc.
- S. Dellavigna., 2011. "Psychology and Economics: Evidence from the Field," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 4.
- Stefano DellaVigna, 2009. "Psychology and Economics: Evidence from the Field," Journal of Economic Literature, American Economic Association, vol. 47(2), pages 315-72, June.
- S. Dellavigna., 2011. "Psychology and Economics: Evidence from the Field," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 5.
- Raj Chetty, 2009. "The Simple Economics of Salience and Taxation," NBER Working Papers 15246, National Bureau of Economic Research, Inc.
- Stefano DellaVigna & John A. List & Ulrike Malmendier, 2012.
"Testing for Altruism and Social Pressure in Charitable Giving,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 127(1), pages 1-56.
- John List & Stefano DellaVigna & Ulrike Malmendier, 2012. "Testing for altruism and social pressure in charitable giving," Natural Field Experiments 00137, The Field Experiments Website.
- Stefano DellaVigna & John A. List & Ulrike Malmendier, 2009. "Testing for Altruism and Social Pressure in Charitable Giving," NBER Working Papers 15629, National Bureau of Economic Research, Inc.
- Raj Chetty & Adam Looney & Kory Kroft, 2009.
"Salience and taxation: theory and evidence,"
Finance and Economics Discussion Series
2009-11, Board of Governors of the Federal Reserve System (U.S.).
- Looney, Adam & Kroft, Kory & Chetty, Raj, 2009. "Salience and Taxation: Theory and Evidence," Scholarly Articles 9748525, Harvard University Department of Economics.
- Raj Chetty & Adam Looney & Kory Kroft, 2007. "Salience and Taxation: Theory and Evidence," NBER Working Papers 13330, National Bureau of Economic Research, Inc.
- Hirshleifer, David & Lim, Sonya Seongyeon & Teoh, Siew Hong, 2006.
"Driven to distraction: Extraneous events and underreaction to earnings news,"
3110, University Library of Munich, Germany, revised 16 Apr 2007.
- David Hirshleifer & Sonya Seongyeon Lim & Siew Hong Teoh, 2009. "Driven to Distraction: Extraneous Events and Underreaction to Earnings News," Journal of Finance, American Finance Association, vol. 64(5), pages 2289-2325, October.
- Amy Finkelstein, 2009.
"E-ZTAX: Tax Salience and Tax Rates,"
The Quarterly Journal of Economics,
MIT Press, vol. 124(3), pages 969-1010, August.
- Kaushik Basu, 2006. "Consumer Cognition and Pricing in the Nines in Oligopolistic Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(1), pages 125-141, 03.
- David S. Lee & Thomas Lemieux, 2009.
"Regression Discontinuity Designs In Economics,"
1118, Princeton University, Department of Economics, Industrial Relations Section..
- Sendhil Mullainathan & Joshua Schwartzstein & Andrei Shleifer, 2006.
"Coarse Thinking and Persuasion,"
NBER Working Papers
12720, National Bureau of Economic Research, Inc.
- Jennifer Brown & Tanjim Hossain & John Morgan, 2010. "Shrouded Attributes and Information Suppression: Evidence from the Field," The Quarterly Journal of Economics, MIT Press, vol. 125(2), pages 859-876, May.
- repec:feb:framed:0087 is not listed on IDEAS
- Pope, Devin G., 2009. "Reacting to rankings: Evidence from "America's Best Hospitals"," Journal of Health Economics, Elsevier, vol. 28(6), pages 1154-1165, December.
- Stefano Dellavigna & Joshua M. Pollet, 2009. "Investor Inattention and Friday Earnings Announcements," Journal of Finance, American Finance Association, vol. 64(2), pages 709-749, 04.
This item is featured on the following reading lists or Wikipedia pages:
- Heuristic Thinking and Limited Attention in the Car Market (AER 2012) in ReplicationWiki
When requesting a correction, please mention this item's handle: RePEc:red:sed011:105. 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: (Christian Zimmermann)
If references are entirely missing, you can add them using this form.