Estimating the Effect of Salience in Wholesale and Retail Car Markets

12 Pages Posted: 22 Feb 2013 Last revised: 16 Oct 2014

See all articles by Meghan R. Busse

Meghan R. Busse

University of California, Berkeley - Haas School of Business

Nicola Lacetera

University of Toronto - Strategic Management; University of Toronto at Mississauga - Department of Management; National Bureau of Economic Research (NBER)

Devin G. Pope

University of Chicago - Booth School of Business

Jorge M. Silva-Risso

University of California, Riverside (UCR) - A. Gary Anderson Graduate School of Management

Justin R. Sydnor

University of Wisconsin - Madison

Date Written: February 2013

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.

Suggested Citation

Busse, Meghan R. and Lacetera, Nicola and Pope, Devin G. and Silva-Risso, Jorge M. and Sydnor, Justin R., Estimating the Effect of Salience in Wholesale and Retail Car Markets (February 2013). NBER Working Paper No. w18820. Available at SSRN: https://ssrn.com/abstract=2222507

Meghan R. Busse (Contact Author)

University of California, Berkeley - Haas School of Business ( email )

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HOME PAGE: http://faculty.haas.berkeley.edu/meghan/index.html

Nicola Lacetera

University of Toronto - Strategic Management ( email )

Canada

University of Toronto at Mississauga - Department of Management

Canada

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Devin G. Pope

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

Jorge M. Silva-Risso

University of California, Riverside (UCR) - A. Gary Anderson Graduate School of Management ( email )

Riverside, CA 92521
United States

Justin R. Sydnor

University of Wisconsin - Madison ( email )

716 Langdon Street
Madison, WI 53706-1481
United States

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