"One Discriminatory Rent" or "Double Jeopardy": Multicomponent Negotiation for New Car Purchases by Meghan R. Busse and Jorge M. Silva-Risso. Published in volume 100, issue 2, pages 470-74 of American Economic Review, May 2010

This paper examines determinants of Olympic success at the country level. Does the United States win its fair share of Olympic medals? Why does China win only 6% of the medals even though it has one-fifth of the world's population? We consider the role of population and economic resources in determining medal totals from 1960 to 1996. At the margin, population and income per capita have similar effects, suggesting that both a large population and high per capita GDP are needed to generate high medal totals. We also provide out-of-sample predictions for the 2000 Olympics in Sydney.

We investigate whether car buyers are myopic about future fuel costs. We estimate the effect of gasoline prices on short-run equilibrium prices of cars of different fuel economies. We then compare the implied changes in willingness-to-pay to the associated changes in expected future gasoline costs for cars of different fuel economies in order to calculate implicit discount rates. Using different assumptions about annual mileage, survival rates, and demand elasticities, we calculate a range of implicit discount rates similar to the range of interest rates paid by car buyers who borrow. We interpret this as showing little evidence of consumer myopia. (JEL D12, H25, L11, L62, L71, L81)

When buying durable goods, consumers must forecast how much utility they will derive from future consumption, including consumption in different states of the world. This can be complicated for consumers because making intertemporal evaluations may expose them to a variety of psychological biases such as present bias, projection bias, and salience effects. We investigate whether consumers are affected by such intertemporal biases when they purchase automobiles. Using data for more than 40 million vehicle transactions, we explore the impact of weather on purchasing decisions. We find that the choice to purchase a convertible or a four-wheel-drive is highly dependent on the weather at the time of purchase in a way that is inconsistent with classical utility theory. We consider a range of rational explanations for the empirical effects we find, but none can explain fully the effects we estimate. We then discuss and explore projection bias and salience as two primary psychological mechanisms that are consistent with our results.

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.