Australian National University
Research School of Economics
H.W. Arndt Building
25a Kingsley Pl.
Acton ACT 2601
Institutional Affiliation: Australian National University
Information about this author at RePEc
NBER Working Papers and Publications
|May 2019||Equilibrium Trade in Automobile Markets|
with Kenneth Gillingham, Anders Munk-Nielsen, John P. Rust, Bertel Schjerning: w25840
We introduce a computationally tractable dynamic equilibrium model of the automobile market where new and used cars of multiple types (e.g. makes/models) are traded by heterogeneous consumers. Prices and quantities are determined endogenously to equate supply and demand for all car types and vintages, along with the ages at which cars are scrapped. The model allows for transactions costs, taxes, flexible specifications of car characteristics, consumer preferences, and heterogeneity. We apply the model to two examples: a revenue-neutral replacement of the new vehicle registration tax with a higher fuel tax and a hypothetical “merger to monopoly” in an oligopolistic new car market. We show substantial gains in consumer welfare from the tax policy change, as well as important effects on gove...