This paper empirically tests whether there are asymmetric information problems in the market for used Chevrolet Corvettes sold on eBay. The first test is based on a result from Akerlof (Quarterly Journal of Economics, 1970). If there is asymmetric information in the used market, bidders should place a premium on a new Corvette, all else equal. The paper finds little systematic evidence of a new car premium. The second test is based on a result from Bajari and Hortacsu (Rand Journal of Economics 34(2):329-355, 2003). If there is asymmetric information, then bidders will prefer to bid late in the auction in order to conceal their private information from other bidders. The paper fails to find evidence of more late bidding on used Corvettes relative to new Corvettes. The third test is based on the idea that if there is asymmetric information then there may be a winner's curse problem in these auctions. The paper fails to find evidence consistent with bidders avoiding the winner's curse. The results are not consistent with asymmetric information problems in the market for used Corvettes sold on eBay. It is not clear however, whether this result generalizes to other cars sold on eBay or cars sold in the off-line market.
All Science Journal Classification (ASJC) codes
- Economics, Econometrics and Finance (miscellaneous)