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Automobile Replacement: a Dynamic Structural Approach (2010)
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BibTeX
@MISC{Schiraldi10automobilereplacement:,
author = {Pasquale Schiraldi},
title = {Automobile Replacement: a Dynamic Structural Approach },
year = {2010}
}
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Abstract
This paper specifies and estimates a structural dynamic model of consumer demand for new and used durable goods. Its primary contribution is to provide an explicit estimation procedure for transaction costs, which are crucial to capturing the dynamic nature of consumer decisions. In particular, transaction costs play a key role in determining consumer replacement behavior in both primary and secondary markets for durable goods. The unique data set used in this paper has been collected by the Italian Motor Registry and covers the period from 1994 to 2004. It includes information about sales dates for individual cars over time as well as the initial stock of cars in the sample period. Identification of transaction costs is achieved from the variation in the share of consumers choosing to hold a given car type each period, and from the share of consumers choosing to purchase the same car type that period. Specifically, I estimate a random coefficcients discrete choice model that incorporates a dynamic optimal stopping problem in the spirit of Rust (1987). I apply this model to evaluate the impact of scrappage subsidies on the Italian automobile market in 1997 and 1998.
Keyphrases
automobile replacement transaction cost dynamic structural approach car type durable good sale date individual car key role sample period initial stock primary contribution consumer decision structural dynamic model used durable good secondary market explicit estimation procedure scrappage subsidy paper speci e consumer replacement behavior italian automobile market unique data set consumer demand identi cation italian motor registry dynamic nature
