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Automobile replacement: a dynamic structural approach
Author(s) -
Schiraldi Pasquale
Publication year - 2011
Publication title -
the rand journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.687
H-Index - 108
eISSN - 1756-2171
pISSN - 0741-6261
DOI - 10.1111/j.1756-2171.2011.00133.x
Subject(s) - subsidy , identification (biology) , transaction cost , discrete choice , database transaction , durable good , estimation , econometrics , market share , order (exchange) , variation (astronomy) , microeconomics , computer science , economics , botany , management , finance , programming language , market economy , biology , physics , astrophysics
This article 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. 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‐coefficient discrete‐choice model that incorporates a dynamic optimal stopping problem. I apply this model to evaluate the impact of scrappage subsidies on the Italian automobile market.