The market for used cars: A new test of the lemons model

Arbeitspapier

The lemons model assumes that owners of used cars have an informational advantage over potential buyers with respect to the quality of their vehicles. Owners of bad cars will try to sell them to unsuspecting buyers while owners of good cars will hold on to theirs. Consequently, the quality of traded automobiles should be sub-average. In contrast to previous work, the following paper tests both the assumption of informational asymmetry and the prediction of sub-average traded car quality using a sample consisting of all 1985 cars registered in the Swiss canton of Basle-City over the period 1985-1991. Our data support both the assumption and the prediction of the lemons model. The lemons problem does not appear to be widespread, however.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: HWWA Discussion Paper ; No. 187

Classification and Topics

• Classification: Wirtschaft ; Automobiles; Other Transportation Equipment; Related Parts and Equipment ; Information and Product Quality; Standardization and Compatibility ; Asymmetric and Private Information; Mechanism Design ; Duration Analysis; Optimal Timing Strategies
• Subject: Adverse Selection ; Used Car Market ; Duration Models ; Gebrauchtfahrzeug ; Gebrauchtfahrzeughandel ; Asymmetrische Information ; Adverse Selection ; Schätzung ; Schweiz

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Emons, Winand ; Sheldon, George
• Event: Veröffentlichung
• (who): Hamburg Institute of International Economics (HWWA)
• (where): Hamburg
• (when): 2002

Further information

• Handle: http://hdl.handle.net/10419/19348
• Last update: 10.01.0006, 11:44 AM CET