Juan-Pablo Montero (PUC-Chile)
Juan-Pablo Montero will present Matching Cars, with Matti Liski and Iivo Vehviläinen.
More than 90 percent of the car market consists of second-hand units, that is, cars more than a year old. We develop a multidimensional sorting framework that assigns a given stock of cars with multiple heterogeneous attributes to consumers with heterogeneous preferences over those attributes. We use the framework to study how policies affecting usage costs influence trading, car values, mileage, and emissions. For these effects to operate through both driving behavior (the intensive margin) and the reallocation of cars across owners (the extensive margin), goods must be multidimensional. In an efficient market, car prices do not directly reflect usage costs, but rather the intensity of competition for fuel efficiency, which depends on the distribution of driving needs relative to the distribution of fuel efficiencies in the fleet. These predictions are empirically implementable.