Estimating the Effect of Salience in Wholesale and Retail Car Markets
12 Pages Posted: 22 Feb 2013 Last revised: 5 Jun 2022
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: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Bank Deposit Rate Clustering: Theory and Empirical Evidence
By Charles M. Kahn, George Pennacchi, ...
-
99: Are Retailers Best Responding to Rational Consumers? Experimental Evidence
By Bradley J. Ruffle and Ze'ev Shtudiner
-
Consumer Cognition and Pricing in the 9's in Oligopolistic Markets
By Kaushik Basu
-
Consumer Cognition and Pricing in the Nines in Oligopolistic Markets
By Kaushik Basu
-
Penny Wise, Dollar Foolish: Buy-Sell Imbalances On and Around Round Numbers
By Utpal Bhattacharya, Craig W. Holden, ...
-
Heuristic Thinking and Limited Attention in the Car Market
By Nicola Lacetera, Devin G. Pope, ...
-
Heuristic Thinking and Limited Attention in the Car Market
By Nicola Lacetera, Devin G. Pope, ...
-
Clustering in Real Estate Prices: Determinants and Consequences
By Oded Palmon, Barton A. Smith, ...
-
Nines in the Endings of Stock Prices
By Mark Bagnoli, Jinyoung Park, ...