Durables and Lemons: Private Information and the Market for Cars (original) (raw)

A Dynamic Model of Equilibrium with Private Information

2020

We present a finite-horizon, multiperiod model of a market for durable goods1 (like cars) whose owners have private information about the good’s quality. A good’s quality changes stochastically over time in a way that need not be stationary. Equilibrium is characterized not only by prices and quantities, but also by the quality distributions of the different classes of the goods for sale. We use a fixed-point method to prove the existence of equilibrium.

Asymmetric Information and the Automobile Loan Market

2005

Information revelation can occur in a variety of ways. For example, in the home mortgage market, borrowers reveal their expected house tenure through their choice of mortgage contracts. As a result, lenders offer a menu of mortgage interest rate and point combinations in an effort to learn private information about borrowers' potential mobility. This paper uses a unique dataset of individual automobile loan performance to assess whether borrower consumption choice reveals information about future loan performance. Results indicate that the automotive make and model a consumer selects provides information about the loan's performance -that is, we observe differential loan performance after we control for borrower characteristics. The results from this study suggest that lenders, instead of charging a "house-rate" for all auto loans, could profitably pursue risk-based pricing based on the type of car the borrower purchases.

The Impact of Government Policy on Private Car Ownership in Ireland.

We construct a model of the stock of private cars in the Republic of Ireland. The model distinguishes cars by fuel, engine size and age. The modelled car stock is build up from a long history of data on sales, and calibrated to recent data on actual stock. We complement the data on the number of cars with data on fuel efficiency and distance driven – which together give fuel use and emissions – and the costs of purchase, ownership and use. We use the model to project the car stock from 2010 to 2025. The following results emerge. The 2009 reform of the vehicle registration and motor tax has lead to a dramatic shift from petrol to diesel cars. Fuel efficiency has improved and will improve further as a result, but because diesel cars are heavier, carbon dioxide emissions are reduced but not substantially so. The projected emissions in 2020 are roughly the same as in 2007. In a second set of simulations, we impose the government targets for electrification of transport. As all-electric vehicles are likely to displace small, efficient, and little-driven petrol cars, the effect on carbon dioxide emissions is minimal. We also consider the scrappage scheme, which has little effect as it applies to a small fraction of the car stock only.

The dynamic effects of car ownership determinants in the Netherlands

2019

This thesis discusses the dynamics of some main household car ownership determinants in the Netherlands between 2005 and 2015. First of all, a literature review is made to look for existing relationships and dynamic effects. Next, three models were created with household car ownership as dependent variable. The models were formed around the three main determinants: income, urban form and household composition. Adding a interaction between the determinant of interest and the year of observation, the dynamic effects were estimated with the pooled ordinary least squares method. The graphs show a dynamic effect for both income and household composition, where the income effect seems to follow the business cycle. Household composition showed decreasing importance in determining household car ownership. In contradiction, urban form showed no significant dynamic effect between 2005 and 2015. The author recommends further analysis with some model improvements to confirm found effects and fi...

Household car ownership in urban and rural areas in Sweden 1999–2008

This paper studies household car ownership in urban and rural areas in Sweden using register data for all adult Swedes from 1999 to 2008. Data for individuals are linked to members of the same household, allowing us to estimate models of households. Multinomial ordered probit models for households' private car ownership in Sweden are estimated and used to compare urban and rural households with respect to sensitivity of car ownership. The central result from comparing urban and rural households is that rural households are less likely to exit from car ownership and more likely to increase car ownership than comparable urban households. This supports the notion that rural households are more dependent on their cars than urban households. Rural car ownership is also more sensitive to fuel price changes and the number of adults in the household. Compared with other countries, our results indicate that Swedish households' car ownership is very resistant to change. The status of ...

Differences in the effects of fuel price and income on private car use in Sweden 1999-2008

The objective of this paper is to analyse how the use of privately owned cars in Sweden varies across a number of background parameters including fuel price, disposable income, car purchase cost index, children over 18, employment and the car owners’ distance to work. These factors are analysed separately for men and women, individuals living in urban, rural and sparsely populated areas as well as disposable income quartiles. In particular the adaptation of car use of low income car owners in rural and sparsely populated areas to fuel cost and disposable income variations is analysed. Register data of the whole population in Sweden taken from the Swedish tax authorities for 1999-2008 as well as kilometre readings from the National Vehicle Inspection is used. This allows tracking individual changes in car use over ten years as well as to contrast car use in rural and sparsely populated areas to car use in urban areas. Car use is modelled with a dynamic panel data specification, permi...

Distortionary company car taxation: deadweight losses through increased car ownership

We introduce a methodology to estimate the effect of parking prices on car drivers' choice between street and garage parking. Our key identifying assumption is that the marginal benefit of parking duration does not depend on this choice. The endogeneity of parking duration is acknowledged in the estimation procedure. We apply the methodology during daytime hours to an area where cruising for parking is absent, street parking is ubiquitous and garage parking is discretely located over space. So, in this area, the average distance to the final destination is longer for garage parking than for street parking. We find that drivers are willing to pay a premium for street parking which ranges from € 0.37 to € 0.60. Given a parking duration of one hour, we find that the demand for street parking is price elastic: the price elasticity of demand for the share of street parking is - 5.5. However, this price elasticity is much smaller for shorter parking durations. Our estimates imply that even small reductions in street parking prices induce a strong increase in the stock of cars parked on-street. Our estimates also imply that a policy which contains a street premium (so street prices exceed garage prices) is welfare improving, because drivers with longer parking durations are induced to use parking locations that are, on average, farther away, so this policy reduces total walking time.

Models for Car Ownership, Car Transactions and Vehicle Type

This paper describes the integrated survival models for car ownership, car transaction and vehicle type. These models are estimated based on a two-wave panel study. The design of the questionnaire in the first wave (1993) allows the reconstruction of the history of car ownership and transactions and the history of the household characteristics to different extent. NMNL models for household's choice of car transaction (disposal, purchase, replacement or do nothing) and vehicle type were estimated for years 1988 until 1994 as cross-sectional data. Logsum variables from the NMNL models are used in survival models for car ownership and car transactions. This was the main reason for not using lagged variables in the NMNL models. With lagged variables, the models would be dynamic models of car transaction and car type choice. Survival models for car ownership and car transactions were estimated using a Weibull distribution as well as an exponential distribution. The log likelihood shows that the Weibull model is the better one for all the model formulations. The exponential duration model is very restrictive. It does not handle hazards that are increasing or decreasing, while the Weibull duration model does so. We failed to estimate models based on other distributions.

Empirical Analyses of Car Ownership and Car use in Sweden

2009

The purpose of this report is to describe and analyse how individual car ownership and car use in Sweden are affected by costs, income, sex and the place of residence of the individual and further to investigate whether inhabitants of rural areas close to urban areas or sparsely populated areas are more sensitive to costs and income with regard to car ownership and car use than other individuals in Sweden. The report uses register data for the whole of the Swedish population, meter readings from the vehicle inspection, and the area categorisation of the National Rural Development Agency: urban area, rural area close to an urban area and sparsely populated area. Some of the new descriptive results are that: inhabitants of urban areas own and use cars to a lesser extent than inhabitants of rural areas. The difference in driven distances, however, is small. The difference between rural areas close to urban areas and sparsely populated areas is less. In the model analyses we find small ...