Price Discontinuities in an online used Car Market
We examine empirically whether individuals evaluating used cars efficiently aggregate all relevant information on its constituent characteristics. Based on detailed field data on more than 80,000 used car offers in a large online marketplace, we provide evidence for biased information processing. While the precise date of first registration, i.e., its "age", is publicly and prominently stated for each car, we identify an amplified value adjustment for otherwise identical cars at year-count changes. These discontinuities indicate that individuals over-react to the figure displayed in the latter, while underrating the finer information on a car's age as conveyed through the month of first registration. Moreover, we are able to replicate the findings from Lacetera et al (2009) and find discontinuous drops in prices at 10,000km odometer thresholds. While the latter finding, as suggested by Lacetera et al (2009), is consistent with a left-digit bias in the processing of numerical information, the first finding cannot be explained by this. Our findings underline that information-processing heuristics matter also in markets with large stakes and easily observed information
|Date of creation:||2013|
|Contact details of provider:|| Web page: http://www.socialpolitik.org/|
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.:
- Shogren, Jason F. & Seung Y. Shin & Dermot J. Hayes & James B. Kliebenstein, 1994.
"Resolving Differences in Willingness to Pay and Willingness to Accept,"
American Economic Review,
American Economic Association, vol. 84(1), pages 255-270, March.
- Shogren, Jason F. & Shin, Seung Youll & Hayes, Dermot J. & Kliebenstein, James, 1994. "Resolving Differences in Willingness to Pay and Willingness to Accept," Staff General Research Papers Archive 701, Iowa State University, Department of Economics.
- Ulrike Malmendier & Young Han Lee, 2011. "The Bidder's Curse," American Economic Review, American Economic Association, vol. 101(2), pages 749-787, April.
- Young Han Lee & Ulrike Malmendier, 2007. "The Bidder's Curse," NBER Working Papers 13699, National Bureau of Economic Research, Inc.
- Gregory Lewis, 2011. "Asymmetric Information, Adverse Selection and Online Disclosure: The Case of eBay Motors," American Economic Review, American Economic Association, vol. 101(4), pages 1535-1546, June.
- George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500. Full references (including those not matched with items on IDEAS)