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American Economic Review Vol. 103 No. 3 2013

Estimating the Effect of Salience in Wholesale and Retail Car Markets

Meghan R. Busse1; Nicola Lacetera2; Devin G. Pope3; Jorge Silva-Risso4; Justin Sydnor5

1 Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208. · 2 University of Toronto, 105 St. George Street, Toronto, Ontario, Canada. · 3 University of Chicago Booth School of Business, 5807 South Woodlawn Avenue, Chicago, IL 60637. · 4 University of California, Riverside, 900 University Ave., Riverside, CA. · 5 University of Wisconsin School of Business, 975 University Ave, Madison, WI.

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.

DOI
10.1257/aer.103.3.575
Volume
103
Issue
3
Pages
575-579
Language
en
Sources
bibtex:phds-export.bib crossref openalex

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