The Market for Used Cars: A New Test of the Lemons Model

Emons, Winand; Sheldon, George (April 2002). The Market for Used Cars: A New Test of the Lemons Model (Diskussionsschriften 02-02). Bern: Universität Bern Volkswirtschaftliches Institut

[img]
Preview
Text
dp0202.pdf - Published Version
Available under License Creative Commons: Attribution (CC-BY).

Download (217kB) | Preview

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.

Item Type:

Working Paper

Division/Institute:

03 Faculty of Business, Economics and Social Sciences > Department of Economics

UniBE Contributor:

Emons, Winand

Subjects:

300 Social sciences, sociology & anthropology > 330 Economics

Series:

Diskussionsschriften

Publisher:

Universität Bern Volkswirtschaftliches Institut

Language:

English

Submitter:

Aline Lehnherr

Date Deposited:

15 Apr 2020 11:56

Last Modified:

06 Aug 2020 14:18

JEL Classification:

C41, D82, L15, L62

BORIS DOI:

10.7892/boris.142431

URI:

https://boris.unibe.ch/id/eprint/142431

Actions (login required)

Edit item Edit item
Provide Feedback