Quarterly Journal of Economics Vol. 110 No. 1 1995
Search at Wholesale Auto Auctions
Abstract
Wholesale trade in used cars is conducted by ascending bid auctions, with sale subject to the seller's acceptance of the winning bid. One out of three times the seller rejects the bid, and no trade takes place. I model the seller's decision as the outcome of search, and thus determined by the winning bid distribution, and a reported retail price. This market is ideal for testing search theory since all offers, whether or not accepted, are observed. Qualitative predictions of the theory, in particular the role of the variance, are confirmed. The quantitative results are more ambiguous. One out of every three times, seller and buyer fail to trade at wholesale auto auctions. Instead, the seller exercises his right to refuse the winning bid. This paper shows how search theory can explain the sale rate and its variation across different types of automobiles. Few readers will find intrinsic interest in wholesale auto auctions. The value to studying them lies instead in the opportu-nity to observe all offers to trade in an environment that neatly
- DOI
- 10.2307/2118509
- Volume
- 110
- Issue
- 1
- Pages
- 23-49
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref