Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/226338
Authors: 
van den Bijgaart, Inge
Cerruti, Davide
Year of Publication: 
2020
Series/Report no.: 
CESifo Working Paper No. 8636
Abstract: 
We evaluate the effect of vehicle recalls on vehicle transactions in the second-hand market. Using a rich dataset of Dutch vehicle registrations, we exploit the quasi-experimental variation in recalls across nearly-identical cars. We find strong heterogeneities across market segment: vehicles with a lower (higher) list price or some (zero) defects experience an increase (decrease) in transactions after a recall. Based on our theoretical model, this suggests that recalls increase sorting in low-end markets, yet exacerbate adverse selection in high-end markets. Our results shed light on the effect of information arrival in markets subject to uncertainty and information asymmetries.
Subjects: 
vehicles
recalls
adverse selection
sorting
information
JEL: 
D12
D83
L15
L62
Document Type: 
Working Paper

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