How much competition is a secondary Market ? by Jiawei Chen , Susanna Esteban and Matthew Shum April 2010

How Much Competition is a Secondary Market?

Do active secondary markets aid or harm durable goods manufacturers? We build a dynamic equilibrium model of durable goods oligopoly, with consumers who incur lumpy costs when transacting in the secondary market, and calibrate it to U.S. automobile industry data. By varying transaction costs, we obtain a direct measure of the competitive pressure that secondary markets create on durable goods m...

Do sales tax credits stimulate the automobile market?

Available online 1 March 2010

Demand and Supply Estimation Biases Due to Omission of Durability

We build a dynamic equilibrium model of a durable goods oligopoly with a competitive secondary market to evaluate the bias in estimating the structural parameters of demand and supply when durability is omitted. We simulate data from our dynamic model and use them to estimate the model’s static counterpart. We find that the static estimate of the elasticity of demand is an overestimate of the t...

Measuring Market Power in a Durable Goods Oligopoly: the Automobile Market

Product Compatibility in Network Industries with Switching Costs

This paper investigates how switching costs affect product compatibility and market dynamics in network industries. A reduction in the switching cost makes the firms’ products more attractive relative to the outside good, which diminishes the market expansion benefit of making products compatible. As a result, the larger firm is more likely to veto compatibility in order to maintain its install...