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Turnover of Used Durables in a Stationary Equilibrium: Are Older Goods Traded More?

Journal of Political Economy 2002 110(6), 1390-1413
This paper develops a dynamic model with transaction costs to determine the equilibrium resale pattern in a market for a durable good. The key result is that the probability of resale is nonmonotonic in the age of the good. Trade volume is relatively low in the very beginning and in the middle of a good’s life. This result helps explain observed variations of resale rates across vintages for the U.S. market of used cars.