Estimating the Effect of Salience in Wholesale and Retail Car Markets
Meghan R. Busse, Nicola Lacetera, Devin G. Pope, Jorge Silva-Risso, Justin R. Sydnor
American Economic Review · 2013 · Volume 103 · Issue 3
Abstract
We investigate whether the first digit of an odometer reading is more salient to consumers than subsequent digits. We find that retail transaction prices and volumes of used vehicles drop discontinuously at 10,000-mile odometer thresholds, echoing effects found in the wholesale market by Lacetera, Pope and Sydnor (2012). Our results reveal that retail consumers devote limited attention to evaluating vehicle mileage, and that this drives effects in the wholesale market. We estimate the inattention parameter implied by the price discontinuities. In addition, our results suggest that estimating consumer-level structural parameters using data from an intermediate market can give misleading results.
Keywords
Automobiles, Other Transportation Equipment, Retail and Wholesale Trade, e-Commerce
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