Moral Hazard and the Market for Used Automobiles

Moral Hazard and the Market for Used Automobiles I examine a moral hazard problem faced by the owners offleet automobiles. Because fleet vehicles are generally notdriven by their owners, the drivers of these vehicles do not bearall of the costs of either neglecting or abusing the vehicle, causingthese vehicles to depreciate faster than owner-operated vehicles. Empirical estimates show that, after controlling for mileage, fleetvehicles depreciate approximately ten to thirteen percent fasterper-year than owner-driven vehicles. I argue that at least partof this increased depreciation is attributable to moral hazard. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Moral Hazard and the Market for Used Automobiles

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Publisher
Springer Journals
Copyright
Copyright © 2003 by Kluwer Academic Publishers
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1023/B:REIO.0000005630.49071.4a
Publisher site
See Article on Publisher Site

Abstract

I examine a moral hazard problem faced by the owners offleet automobiles. Because fleet vehicles are generally notdriven by their owners, the drivers of these vehicles do not bearall of the costs of either neglecting or abusing the vehicle, causingthese vehicles to depreciate faster than owner-operated vehicles. Empirical estimates show that, after controlling for mileage, fleetvehicles depreciate approximately ten to thirteen percent fasterper-year than owner-driven vehicles. I argue that at least partof this increased depreciation is attributable to moral hazard.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Oct 4, 2004

References

  • Product Durability and Moral Hazard
    Goering, G. E.

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